CD&R begins £500m Morrisons property sale as it warns on profits

The grocer is said to be lining up advisers to oversee the disposal of a ‘significant portion’ of its manufacturing and distribution facilities across the UK

The new owner of Morrisons, Clayton Dubilier and Rice, has reportedly begun plans to sell a £500m property portfolio months after completing its £7bn takeover, after the grocer also warned its profits could be impacted by inflation and war in Ukraine.

Morrisons has revealed it experienced a fall in earnings in the three-month period ending on 30 January, with underlying quarterly profits falling almost 10% to £316m. It attributed the fall due to inflationary pressures and the impact of the war in Ukraine.

Morrisons said: “We are taking steps to mitigate the impact of these developments on our EBITDA (core earnings) for the remainder of the year. Unless these conditions improve, the impact of these developments could have a material adverse effect on our sales and EBITDA for the year.”

Clayton Dubilier and Rice became owners last autumn after winning a takeover battle, outbidding a consortium led by Fortress Investment Group.

According to Sky News, the grocer is now said to be lining up advisers to oversee the disposal of a “significant portion” of its manufacturing and distribution facilities across the UK. A formal process is expected to begin, following a lengthy planning period.

In its formal offer documents relating to the transaction, it said: “Bidco [the company formed by the firm to implement the deal] recognises that the high proportion of freehold ownership of the Morrisons store estate is a particular strength of the business which has been carefully preserved over many years and will continue to be a cornerstone of Morrisons.

“Bidco does not intend to engage in any material store sale and leaseback transactions.”

It added: “High levels of real estate ownership has been a feature of previous Clayton Dubilier and Rice investments, including MFG where real estate ownership has remained above 90%, since the acquisition by Clayton Dubilier and Rice in 2015.”

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