Shares in Morrisons (MRW) leapt 32% after revealing over the weekend that it had rejected a takeover approach from US private equity investor Clayton, Dubilier & Rice.

Shares in the UK’s fourth-largest supermarket group by market share, jumped to 237p, their highest level since early 2019. The offer, which valued the grocer at 230p per share or £5.5 billion plus the 5.11p per share dividend announced in March, was turned down by the board which said it ‘significantly undervalued Morrisons and its future prospects’.

However, the approach from CDR, which is advised by former Tesco (TSCO) boss Sir Terry Leahy among others, could spur more private equity interest. Asda, the third-largest grocery chain by market share, was recently acquired by the Issa Brothers.

PAIN FOR SHORT-SELLERS

The US bidder has until the close of business on 17 July to announce whether it will make a firm offer for Morrisons and at what price, although that deadline can be extended under the Takeover Code.

Supermarket groups are amongst the most heavily-shorted stocks in the FTSE 100, with 5.7% of Morrisons’ outstanding capital on loan to short sellers and 7.5% of Sainsbury’s (SBRY) capital out on loan, making it the most shorted stock in the index.

Firms with significant short positions in Morrisons include BlackRock (2.29%), Pelham (1.65%), Citadel (0.73%), GLG Partners (0.53%) and Third Point (0.5%) according to data collected by ShortTracker.

Shorts in Sainsbury include four of the five firms above, plus Marshall Wace (1.29%) and KPS (0.68%). Sainsbury shares jumped 4.1% to 271p, their highest price since early 2019.

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Issue Date: 21 Jun 2021