Rumours that a takeover bid for the UK’s fourth largest retailer Morrisons is imminent may have driven up share prices yesterday (22 June), but market analysts have greeted them with scepticism and shares have dropped in value as a result.
At one point yesterday, Morrisons shares had increased by more than 3% to 240p (US$4.35) a share on the back of the rumours. However, they closed only 1.5% up at 198p, only to decline a further 1.14% by time of press today, currently valued at 195.5p.
“It’s always tricky with market speculation,” Clive Black, a retail analyst at Shorecap told just-food. “On the one hand, you shouldn’t be dismissive – never say never – but on the other there are a number of factors that make a Morrisons bid unlikely.”
The Morrison family’s ownership of an 18% stake could prove a major stumbling block for a potential takeover. The management change, with the recent appointment of Marc Bolland as CEO, would also make it a questionable time to launch a bid. Meanwhile, the current share price is not low, making it a less than ideal time to buy.
“Morrisons is a big operation, valued in the region of GBP5bn. Including debt, your looking at an investment circa GBP6.5bn. That level of investment requires a large player. All of the UK trade groups can be ruled out, so that leaves a financial or property based entrepreneur,” Black explained.
“While these rumours can’t be ruled out, until something concrete happens I view them very sceptically,” he concluded.