Thursday 29 September 2022

New Owner Of Morrisons Asks Staff To Invest In The Business

Over 800 staff at Morrisons – from store managers upwards – have reportedly been asked by the company’s new private equity owner to invest thousands of pounds of their own money in the struggling supermarket chain.

According to The Guardian, middle management level departmental heads had been asked by CD&R for £10,000 while the directors of departments had been asked for £25,000 each. The minimum investment required to participate is said to be £2,000.

The newspaper’s source said that while contributions were voluntary, some staff were annoyed about feeling pressed to make a contribution to the underperforming business at the time of a cost-of-living crisis. “People are used to being paid bonuses rather than asked to invest,” the source said.

However, those who have agreed to invest in shares in Morrisons were paid a special bonus, equivalent to 60% of the amount they were asked to invest.

A spokesperson for the retailer is quoted by The Guardian as saying: “The opportunity to invest in the future of Morrisons was incredibly popular throughout the business with over 800 colleagues, or more than 90% of those eligible, choosing to invest.”

One expert told the newspaper that it was common to ask staff to invest as part of private equity deals, with the stakes seen as an incentive to help the business grow.

He suggested that the wider-than-usual scope of the Morrisons scheme could be seen as a good thing, allowing more people to benefit from a potential return on their investment.

Morrisons, which was acquired in 2021 by the CD&R in a deal worth £7bn, has been losing sales amidst the tough trading conditions, with its market share slipping behind Aldi in recent months.

Surveys suggest its prices have become more expensive compared to key competitors in recent months, weakening its performance.
One industry insider is quoted by The Guardian as saying: “The numbers look grim. [The product] doesn’t look exciting and they have missed quite a lot of opportunities.”

The source suggested that suppliers were becoming disillusioned as volume of goods sold by the retailer fell back.

Following a competition regulators delay, Morrisons is fully controlled by its new owners.
After posting a fall in sales in June, CEO David Potts: “Now that the CMA process has concluded, we are looking forward to working more closely with CD&R as we continue to drive the key pillars of our strategy, focused on being a broader, stronger, popular and accessible business.”

NamNews Implications:
  • By way of perspective, assuming that 800 staff invest an average £10k, means £8m invested.
  • And assuming a 60% bonus on amount invested, a £10k investment would cost staff £4k…
  • One way of getting skin in the game?
  • Still, fingers crossed, we are all gambling now…
#Risk #Investment #SkinInGame

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