Morrisons is takeover target for private equity consortium, rumours say

Supermarket group Morrisons could be a £6.4bn takeover target for Tesco or a private equity consortium led by Permira, according to newspaper reports.

Following Sainsbury's agreed acquisition of Argos, rumours around an imminent 275p offer for Wm Morrison were both "rife" and "red hot", according to the Daily Mail.

Ex-Tesco man David Potts was appointed as chief executive a year ago by chairman and fellow Tesco director Andrew Higginson.

But the rumours were dismissed as "shabby" by one analyst, who added that he was "not sure the competition regulator would allow that", while another said a bid from the Permira PE consortium was "more likely".

Atif Latif, director of trading at Guardian Stockbrokers, said a deal "seems unlikely" but was plausible.

"Given the relative size of the market share by both a deal by Tesco/PE may not materialise but may be plausible by a PE house that could be able to afford - at a stretch - circa £2.75.

"We did have chatter last year that Aldi perhaps had in interest in MRW so a bid maybe likely by someone."

The plausibility stemmed from the fact that there is "unlocked value" within Morrison's share price, Latif said, given the property portfolio that PE could extract, signs of improving free cash flow, further cost savings and future margin benefits from online.

Amid the intense pressures of the UK grocery market, where it has lost much market share to Lidl and Aldi, Morrison earlier this month launched its new 'Price Crunch' pricing and marketing campaign as part of Potts' long-term realignment of the brand as a "value" supermarket.

The FTSE 100 grocer said will cut the price of 1,072 items, mostly on fresh food, with an average 19% reduction and deep discounts on fruit and vegetables.

The latest grocery market share data showed Morrisons' market share fell by 0.3 percentage points to 10.8%.

Prior to this, the group impressed analysts with like-for-like sales growth over the festive period of 0.2% versus a forecast sizeable decline.

Shares in Morrison were up 3.4% to 187.6p, their highest level since last summer.