Speculation about a wave of takeovers in the supermarket sector has helped fuel a near 5% rise in the shares of Morrisons.
Its shares rose 7.5p, more than 4% higher, to 170p amid the takeover talk and alongside an upgrade on the shares from brokers at UBS from sell to neutral.
The shares of the UK’s fourth-largest food retailer were among the biggest risers in the FTSE 100 after the acquisitive South African businessman Christo Wiese appeared to raise the idea of an expansion of his Brait investment vehicle into the UK supermarket sector.
Wiese has built up the supermarket giant Shoprite in his native South Africa, while in the UK Brait has taken over New Look, the fashion retailer, the gym chain Virgin Active and taken a 19% stake in grocery chain Iceland.
“The UK is extremely competitive but I can assure you it is as competitive in South Africa if not more. We South Africans find it very easy to do business in the UK; it is similar and it has the same challenges,” he told the Daily Telegraph.
But in an interview with the Guardian a week ago, Wiese appeared to play down the idea of takeovers of supermarkets, pointing instead to putting some of Brait’s £1bn acquisition war chest into areas such as renewable energy. He has previously been linked with BHS, the chain created by Sir Philip Green before being sold for £1 to City investors through the Retail Acquisitions vehicle.
Analysts at UBS upgraded their view on the shares, which were trading at 186p a month ago. While customers are indifferent to the business, the UBS analysts said: “Some of the retail fixes already put in place – notably more hours in store – look to be working and we think that the focus from management will be on the basics, such as service and availability.”
New management was installed at Morrisons at the start of the year when Dalton Philips was fired. The turnaround team comprises former executives of Tesco – chairman Andy Higginson, chief executive David Potts and finance director Trevor Strain – who have pledged to invest £1bn over three years in cutting prices. The convenience stores M Local are also being sold off. It reports it half-year results next week.
Wiese has taken steps to compete with supermarkets by backing Pep & Co, a clothing discounter run by former Asda boss Andy Bond.
The falls in the share prices of retailers has triggered expectations of takeovers. Mike Dennis of Cantor Fitzgerald said: “In our view, the UK and European grocery industry remains in a perfect storm of price deflation, weak demand and rising costs. This could ultimately lead to several quoted grocery brands considering a take private option that would allow management more time to review, sell off and restructure their formats and space requirements.”
This article was written by Jill Treanor, for theguardian.com on Thursday 3rd September 2015 11.21 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010