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Morrisons (MRW)

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Dod101
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Re: Morrisons (MRW)

#424886

Postby Dod101 » July 5th, 2021, 9:26 am

simoan wrote:
dealtn wrote:
Arborbridge wrote: Not sure what can be done about at government level in general, but forgive me if I resent a bunch of well healed opportunists nicking a good company from me for a song.


Your preference being you would rather the status quo and you continue to hold shares at a price that hadn't risen 50%? How long would you be holding and happy, or would you be recognising the derisory price and buying more shares in anticipation of the inevitable rise above today's "song" price?

The price had been around these levels for 2 years or so. The entire company will have been traded numerous times over in the market during that time.

I suspect your well healed opportunists are in fact something entirely different. More like committed forensic analysts attributing valuation techniques focussed on actual/potential cash flow and not market sentiment or concerns about overseas privately owned competitors. They aren't nicking anything, they are paying 50% or so more than what the majority of its owners valued it at. The company itself may not be a good one, it being universally valued at a much lower price.

Crikey, dealtn! Please cut out all this sensible level headed type stuff and let those driven by emotion have their moment in the sun. I can't stand all this hand waving; Morrisons is a poor operating business sitting on a lot of valuable freehold property. If the company had done a sale and leaseback itself, and released the value in the property to shareholders, private equity wouldn't be the least bit interested. This situation has arisen due to poor management running a company with an inefficient balance sheet for a number of years, making it a sitting duck in a low interest rate world awash with cheap debt.

All the best, Si


I am not sure that in the long run, 'efficient' Balance Sheets are necessarily all that successful but I understand the sentiment and if that is the way of the world........I certainly reject the sentimental stuff but at the same time, selling off assets, squeezing out big dividends and loading up Balance Sheets with debt is all very well in the short run but we can see what it can do to operating businesses.

Dod

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Re: Morrisons (MRW)

#424888

Postby Dod101 » July 5th, 2021, 9:30 am

Arborbridge wrote:
Dod101 wrote:
Arborbridge wrote:
As regards your last comment, it's well worth reading Gerngulphus's comment about his not at all bad TR from Morrisons, here:

viewtopic.php?f=15&t=30157#p424415

Life's never so simple as it seems!


Yes but as I read it a lot of his return has come from the fortuitous bid now on the table.

Dod


Yes, I believe so. I'm not sure if he comments on pre-bid XIRR and we may never know what the position would be in five years without the bid. However, which ever way you look at it, the point is worth making that Morrisons has not been a dreadful investment for Gengulphus (despite your doubting UK supermarkets) if he comes out with an 8-10% XIRR so his methods have been vindicated one way or another.
It's always possible to find something better, especially by hindsight, but most of our portfolios are made from bread and butter things which are fair to middling. I can't help pointing out, once again, that since you do not keep comparable figures of your own, it is difficult to say whether your adventures are similar, better or worse either at portfolio level or for your individual shares.

Arb.


I have got the records and do a calculation each calendar year but the point is that the three quoted supermarkets and for that matter M & S have been poor investments for many years.

Dod

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Re: Morrisons (MRW)

#424892

Postby vrdiver » July 5th, 2021, 9:50 am

As a Morrisons holder I'm OK with this bid. It's an opportunity to rotate the cash out of my HYP and into an IT, nicely inflated by a takeover.

The alternative was to do nothing, accepting a steady dividend and hoping the management would be up to the challenge of getting business back into decent shape.

Judging by their slow entry into online shopping, their dismal wine section organisation up until recently, their faffing with the customer loyalty scheme (doesn't sound serious, except that they are disrupting their core market intelligence of existing shoppers) or the lack of any convenience store presence, they still have some lessons to learn. On the plus side, they've done a deal with McColls to address the lack of convenience stores (albeit I'd have preferred it if they'd bought and rebranded, not just done a supply deal); judging by that, I think many of us have been handed a rescue package to get our cash back and I am now only curious as to how much...

VRD

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Re: Morrisons (MRW)

#424893

Postby dealtn » July 5th, 2021, 10:01 am

Arborbridge wrote:
And the problem is not bad management but the lack of regulation to protect companies from opportunist bidders who want to asset strip the family silver. If we approve of a company which owns property, or think that is a wise thing to do, why should anyone be allowed to come allow and forcibly nick it? Leave us be.


What and where is this "forcible nicking"?

Someone is paying 50% more than its previously accepted value, not 100% less. The current owners have the choice to accept or decline, your description is nonsensical.

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Re: Morrisons (MRW)

#424908

Postby Dod101 » July 5th, 2021, 10:35 am

Folks here (notably RVF and Arb) have expressed great concern at the possibility of the current bidders asset stripping and loading up the business with debt. My newspaper this morning has got a two page spread telling us that that is not the intention of Fortress and it seems that it might even be that they are giving legally enforceable undertakings. Got to wonder why they are wanting to buy the company.

Dod

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Re: Morrisons (MRW)

#424912

Postby simoan » July 5th, 2021, 10:55 am

Dod101 wrote:Folks here (notably RVF and Arb) have expressed great concern at the possibility of the current bidders asset stripping and loading up the business with debt. My newspaper this morning has got a two page spread telling us that that is not the intention of Fortress and it seems that it might even be that they are giving legally enforceable undertakings. Got to wonder why they are wanting to buy the company.

Dod

It's quite ridiculous to question the motives of buyers, particularly since Fortress previously bought the Majestic Wine shops and have continued to invest in them and operate them normally and successfully to my knowledge. Even their partners such as the Koch family and the Canadian Pension Scheme are hardly the fly-by-night, get rich quick merchants all the hand wavers on here are painting them as. It beggars belief that you are questioning why they want to buy the company!! Do you not like buying shares in companies that generate free cashflow and are undervalued with the big fat cherry of a balance sheet stuffed with freehold property on top? I do, it's why I hold MRW.

Si

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Re: Morrisons (MRW)

#424918

Postby Gengulphus » July 5th, 2021, 11:09 am

Bouleversee wrote:
Dod101 wrote:
Bouleversee wrote:
Obviously, it is down to the shareholders at the meeting at the end of the day so why say "accepted" rather than "recommended"? What I don't understand, to be precise then, is why they have recommended the offer which might be off-putting to other potential bidders waiting in the wings. However, I live in hope that such a low price might bring a few more interested parties out of the woodwork or that the sale will not go ahead at all.

Softbank took over Arm Holdings a few years ago to my annoyance as it was one of my best holdings and have now sold it on to a US company at a large profit. We need more chip makers in this country. And I seem to remember Fortress making allegations about a company which have recently been proved wrong but I could be wrong about that.


If the word 'accepted' has been used it is on the secondary site and of course by Fluke, possibly without thinking too much about it. As I think Gengulphus said, you really ought to go to the Morrison site. In the official statement they use the expression 'recommended offer'. I have never understood why people refer to secondary sites like cityam except as a news channel. If they want the information in all its glory then refer to the official announcement. I doubt very much that a recommendation from the Directors would put off any potential bidder, but it would seem that they have come to the conclusion that the new bid is as good as it is going to get. Who knows?

I think you are splitting hairs, Dod. City AM and the Today programme and all the subsequent news announcements on BBC said the offer had been accepted by the Board which does not necessarily mean that it will be accepted by all major or minor shareholders and this is what the company announcement says: "The boards of directors of Wm Morrison Supermarkets PLC (“Morrisons”) and Oppidum Bidco Limited (“Bidco”) are pleased to announce that they have reached agreement on the terms of a recommended all cash offer by Bidco for the entire issued, and to be issued, share capital of Morrisons (the “Offer”)". Surely this means so far as the Board is concerned, it has accepted the offer and recommends that other shareholders do likewise. ...

No - the company statement you quote means what it says: the board has agreed the terms of an offer that it feels it can recommend to shareholders. It says nothing about the board accepting the offer, for the very good reason that a company board as a body cannot accept a takeover offer. That can only be done in two ways, depending on what form the offer takes: either by individual shareholders accepting with regard to their own shares or by the shareholders as a body passing a couple of votes by 75% majorities to effectively accept with regard to every shareholder's shares (this offer takes the second form, but reserves the right to convert to the first if the Takeover Panel agrees to that change).

And I don't think pointing out the difference between 'accepting' and 'recommending' is splitting hairs, because of what the terms normally mean. If e.g. a second-hand car dealer makes you an offer for your old car and you accept that offer, it's a done deal; in the unlikely event that an acquaintance were to try to accept it without your permission, you would rightly protest that no, they cannot accept an offer for a car they don't own. In the same situation, if an acquaintance recommends you to accept the offer, you would give that recommendation whatever consideration it was due (which might well depend on how knowledgable you reckoned the acquaintance was about second-hand car values, as well as on things like whether their view of your eagerness to sell correctly reflected how eager you actually are), but you would be quite clear that it wasn't yet a done deal and might never be.

So the important difference between 'accepting' and 'recommending' in the normal use of language is that 'accepting' implies a done deal and 'recommending' implies the opposite. So talk about company boards 'accepting' takeover bids fairly strongly suggests that the deal is done and there's nothing to be done about it - and unfortunately, it isn't anything like as obvious to individual shareholders as in the example of the used car that company boards cannot make a takeover bid become a done deal.

Of course, board recommendations do very commonly end up with takeover bids becoming done deals, as large shareholders very often accept or vote in line with them and small shareholders who don't agree with the recommendation usually don't hold enough shares to outweigh them. But there's a vicious circle there: the greater the extent to which board recommendations end up with takeover bids becoming done deals, the more small shareholders get the impression that the board recommendation has decided the issue and there's no point trying to change that decision - and so even more board recommendation end up with takeover bids becoming done deals... And that circle is made more vicious by all the things that make it easier for small shareholders to go along with the recommendation than the opposite, such as nominee holdings often being hard to vote.

Personally, I think the fundamental flaw in the system is the very existence of board recommendations. The board's basic job is to run the company, not to give financial advice to its shareholders. In the normal course of events, if a shareholder were to approach the company and say "I've been offered XXXp per share for my holding - should I accept?", the company would be obliged to respond along "Sorry, we're not authorised to give financial advice - you'll have to get it from your own financial adviser" lines. The situation is different when the offer is being made by someone bidding for all the shares the company has in issue, and I don't see any good (IMHO) reason for it to be different...

Gengulphus

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Re: Morrisons (MRW)

#424919

Postby Dod101 » July 5th, 2021, 11:13 am

You may like holding Morrison but I did not realise that you were an income investor. Certainly there is no point in holding Morrison as a publicly quoted entity since there has been precious little capital gain (if any) however attractive its assets are and if you can only realise a capital gain from a buyout.

That is not what I look for in a share. Anyway we are all different.

Dod

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Re: Morrisons (MRW)

#424920

Postby Dod101 » July 5th, 2021, 11:22 am

Gengulphus wrote:
Bouleversee wrote:
Dod101 wrote:
If the word 'accepted' has been used it is on the secondary site and of course by Fluke, possibly without thinking too much about it. As I think Gengulphus said, you really ought to go to the Morrison site. In the official statement they use the expression 'recommended offer'. I have never understood why people refer to secondary sites like cityam except as a news channel. If they want the information in all its glory then refer to the official announcement. I doubt very much that a recommendation from the Directors would put off any potential bidder, but it would seem that they have come to the conclusion that the new bid is as good as it is going to get. Who knows?

I think you are splitting hairs, Dod. City AM and the Today programme and all the subsequent news announcements on BBC said the offer had been accepted by the Board which does not necessarily mean that it will be accepted by all major or minor shareholders and this is what the company announcement says: "The boards of directors of Wm Morrison Supermarkets PLC (“Morrisons”) and Oppidum Bidco Limited (“Bidco”) are pleased to announce that they have reached agreement on the terms of a recommended all cash offer by Bidco for the entire issued, and to be issued, share capital of Morrisons (the “Offer”)". Surely this means so far as the Board is concerned, it has accepted the offer and recommends that other shareholders do likewise. ...

No - the company statement you quote means what it says: the board has agreed the terms of an offer that it feels it can recommend to shareholders. It says nothing about the board accepting the offer, for the very good reason that a company board as a body cannot accept a takeover offer. That can only be done in two ways, depending on what form the offer takes: either by individual shareholders accepting with regard to their own shares or by the shareholders as a body passing a couple of votes by 75% majorities to effectively accept with regard to every shareholder's shares (this offer takes the second form, but reserves the right to convert to the first if the Takeover Panel agrees to that change).

And I don't think pointing out the difference between 'accepting' and 'recommending' is splitting hairs, because of what the terms normally mean. If e.g. a second-hand car dealer makes you an offer for your old car and you accept that offer, it's a done deal; in the unlikely event that an acquaintance were to try to accept it without your permission, you would rightly protest that no, they cannot accept an offer for a car they don't own. In the same situation, if an acquaintance recommends you to accept the offer, you would give that recommendation whatever consideration it was due (which might well depend on how knowledgable you reckoned the acquaintance was about second-hand car values, as well as on things like whether their view of your eagerness to sell correctly reflected how eager you actually are), but you would be quite clear that it wasn't yet a done deal and might never be.

So the important difference between 'accepting' and 'recommending' in the normal use of language is that 'accepting' implies a done deal and 'recommending' implies the opposite. So talk about company boards 'accepting' takeover bids fairly strongly suggests that the deal is done and there's nothing to be done about it - and unfortunately, it isn't anything like as obvious to individual shareholders as in the example of the used car that company boards cannot make a takeover bid become a done deal.

Of course, board recommendations do very commonly end up with takeover bids becoming done deals, as large shareholders very often accept or vote in line with them and small shareholders who don't agree with the recommendation usually don't hold enough shares to outweigh them. But there's a vicious circle there: the greater the extent to which board recommendations end up with takeover bids becoming done deals, the more small shareholders get the impression that the board recommendation has decided the issue and there's no point trying to change that decision - and so even more board recommendation end up with takeover bids becoming done deals... And that circle is made more vicious by all the things that make it easier for small shareholders to go along with the recommendation than the opposite, such as nominee holdings often being hard to vote.

Personally, I think the fundamental flaw in the system is the very existence of board recommendations. The board's basic job is to run the company, not to give financial advice to its shareholders. In the normal course of events, if a shareholder were to approach the company and say "I've been offered XXXp per share for my holding - should I accept?", the company would be obliged to respond along "Sorry, we're not authorised to give financial advice - you'll have to get it from your own financial adviser" lines. The situation is different when the offer is being made by someone bidding for all the shares the company has in issue, and I don't see any good (IMHO) reason for it to be different...

Gengulphus


I suspect that there must be some fiduciary duty on the Directors to make some comment/issue a recommendation in these circumstances although I have not been able to find any references (but I have not looked very hard either) Otherwise it would not be habitual for Directors to issue a recommendation in the circumstances of an offer. They are of course in a better position than most to be able to analyse the 'soft' factors in a bid, in relation to employees, suppliers and other stakeholders. Most public shareholders will simply look at the price offered.

Dod

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Re: Morrisons (MRW)

#424925

Postby simoan » July 5th, 2021, 11:28 am

Dod101 wrote:You may like holding Morrison but I did not realise that you were an income investor. Certainly there is no point in holding Morrison as a publicly quoted entity since there has been precious little capital gain (if any) however attractive its assets are and if you can only realise a capital gain from a buyout.

That is not what I look for in a share. Anyway we are all different.

Dod

You've obviously not read any of my previous posts on this thread! If you did, you'd be left in no uncertain terms that I never invest for income - that way madness lies along with a guarantee of poor risk/reward returns. I am invested for the freehold property only as a value play - exactly the reason for the current bid situation. Am I happy, very much so, because it's an example of a good investment process leading to a good result, not a poor investment process leading to a lucky result.

Si

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Re: Morrisons (MRW)

#424932

Postby Dod101 » July 5th, 2021, 11:56 am

simoan wrote:
Dod101 wrote:You may like holding Morrison but I did not realise that you were an income investor. Certainly there is no point in holding Morrison as a publicly quoted entity since there has been precious little capital gain (if any) however attractive its assets are and if you can only realise a capital gain from a buyout.

That is not what I look for in a share. Anyway we are all different.

Dod

You've obviously not read any of my previous posts on this thread! If you did, you'd be left in no uncertain terms that I never invest for income - that way madness lies along with a guarantee of poor risk/reward returns. I am invested for the freehold property only as a value play - exactly the reason for the current bid situation. Am I happy, very much so, because it's an example of a good investment process leading to a good result, not a poor investment process leading to a lucky result.

Si


Obviously I have not read you previous posts. I see your motivation. I do not have the time (literally, given my age) to wait for a bid that may never happen. Were it not for the current bids Morrisons like the other supermarkets would just stumble along, often losing value rather than gaining it for shareholders. I have enough of these shares already thank you.

Dod

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Re: Morrisons (MRW)

#424935

Postby 88V8 » July 5th, 2021, 12:14 pm

It's very tempting to take the money and run now... unlikely to be topped by much, and there are better yields to be had.
There was a lot of froth around Marstons when they were at 105p, how all those bidders were about to ride over the hill, now they're at 93p and no more bids.

I just logged out of my trading account... mmmm...

V8

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Re: Morrisons (MRW)

#424944

Postby 88V8 » July 5th, 2021, 12:35 pm

88V8 wrote:I just logged out of my trading account... mmmm...

And then I lohged back in and sold at 267p which is almost break-even.

I already recycled the money into some bonds.

Onwards.

V8

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Re: Morrisons (MRW)

#424945

Postby Bouleversee » July 5th, 2021, 12:40 pm

Whoever wrote the leading article in the Sunday Times yesterday headed "The Morrison takeover is a vote of confidence in UK plc" and starting with "The news that Morrisons, Britain's fourth biggest supermarket chain, is being taken over by a consortium led by an American private equity group will have caused shudders in some" would seem to be assuming it is a done deal, which hopefully it is not. It goes on to question whether it should be allowed to fall into foreign hands and says the answer is a resounding yes, because "when foreign investors want to put money into the UK, it is a demonstration of confidence in the country's future and should be welcomed. We will never prosper if we put up barriers to trade and investment and the govt. has to be careful of the mixed signals it sometimes sends out." It then goes on to commend the deal with Nissan et al to set up a new battery gigafactory, hardly comparable i.m.o.

I'll leave it to other Lemons to argue that one out. What was that BoJo quote about piffle?

I shall hang on in the hope of getting my money back. Sometimes that pays off and sometimes it doesn't. I have had examples of both and invariably get it wrong.

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Re: Morrisons (MRW)

#424946

Postby stockton » July 5th, 2021, 12:43 pm

Given that the bidders will presumably be hoping to extract the odd billion or two from the company it seems likely that the bid will eventually disadvantage the supermarket"s customers. Given that the supermarkets customers and the beneficiaries of the various institutions who currently hold MRWs shares are, to a considerable extent, one and the same, it would actually seem sensible for most institutions to ignore the bids to the long-term benefit of those beneficiaries.

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Re: Morrisons (MRW)

#425065

Postby Gengulphus » July 5th, 2021, 8:01 pm

Dod101 wrote:
Gengulphus wrote:Personally, I think the fundamental flaw in the system is the very existence of board recommendations. The board's basic job is to run the company, not to give financial advice to its shareholders. In the normal course of events, if a shareholder were to approach the company and say "I've been offered XXXp per share for my holding - should I accept?", the company would be obliged to respond along "Sorry, we're not authorised to give financial advice - you'll have to get it from your own financial adviser" lines. The situation is different when the offer is being made by someone bidding for all the shares the company has in issue, and I don't see any good (IMHO) reason for it to be different...

I suspect that there must be some fiduciary duty on the Directors to make some comment/issue a recommendation in these circumstances although I have not been able to find any references (but I have not looked very hard either) Otherwise it would not be habitual for Directors to issue a recommendation in the circumstances of an offer. ...

It would seem to me that if there were a fiduciary duty on the directors to comment on a takeover offer, there would also be one on them to comment on any other offer for a shareholder's shares. My first port of call for requirements for the directors to comment in the event of a takeover offer is instead the obvious one, namely the Takeover Code - and a brief and by no means thorough look at it says that it does indeed place at least one requirement on the directors to comment, namely its Rule 25.2.

Dod101 wrote:... They are of course in a better position than most to be able to analyse the 'soft' factors in a bid, in relation to employees, suppliers and other stakeholders. Most public shareholders will simply look at the price offered.

To be clear, I don't have any problem about them analysing those 'soft' factors, any more than I have any problem with them analysing the company's financial position. As you say, they're in a better position than most to analyse them. But when they recommend a particular course of action to shareholders, they're straying outside of their job of running and reporting on the company, and into the shareholders' job of making investment decisions and financial advisers' job of giving financial advice to those shareholders who want it. And also to be clear, I'm not accusing directors of any wrongdoing: they have to work within the current system, and that pretty clearly requires them to recommend or reject offers (as judged by the fact that I have never seen a board response to a takeover bid say anything like "we recommend that shareholders make up their own minds about the merits of this offer"). Rather, I'm saying that IMHO, the system is flawed in requiring such recommendations and rejections - it should instead require directors not to give financial advice to shareholders.

Gengulphus

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Re: Morrisons (MRW)

#425070

Postby scrumpyjack » July 5th, 2021, 8:11 pm

stockton wrote:Given that the bidders will presumably be hoping to extract the odd billion or two from the company it seems likely that the bid will eventually disadvantage the supermarket"s customers. Given that the supermarkets customers and the beneficiaries of the various institutions who currently hold MRWs shares are, to a considerable extent, one and the same, it would actually seem sensible for most institutions to ignore the bids to the long-term benefit of those beneficiaries.


or alternatively they may feel they can run the business much better, to customers advantage, so more customers buy from Morrisons and the business prospers and so creates more value for its owners, at the same time creating more employment and better job security for the employees.

One should not assume that these things are a zero sum game, ie that if one party benefits, others must lose out.

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Re: Morrisons (MRW)

#425081

Postby Dod101 » July 5th, 2021, 8:42 pm

Thanks Gengulphus. I should have looked at that. A recommendation from the Directors is certainly getting very close to giving financial advice. I cannot really see what advantage there is for the Directors to make a recommendation to accept or reject a particular bid. It is of course for the shareholders to decide but I suppose in the face of a recommendation from the Directors many shareholders will follow that, although I would hope that professional fund managers would make up their own minds.

I am sure that the Directors must be bound to act totally independently but that must be quite difficult in some circumstances such as when they have a significant shareholding.

Dod

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Re: Morrisons (MRW)

#425092

Postby Bouleversee » July 5th, 2021, 9:23 pm

Dod101 wrote:Thanks Gengulphus. I should have looked at that. A recommendation from the Directors is certainly getting very close to giving financial advice. I cannot really see what advantage there is for the Directors to make a recommendation to accept or reject a particular bid. It is of course for the shareholders to decide but I suppose in the face of a recommendation from the Directors many shareholders will follow that, although I would hope that professional fund managers would make up their own minds.

I am sure that the Directors must be bound to act totally independently but that must be quite difficult in some circumstances such as when they have a significant shareholding.

Dod


Or when they are offered jobs and incentives under the new regime.

I note the BBC continues to refer to the Board's having accepted the Fortress offer.

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Re: Morrisons (MRW)

#425105

Postby BT63 » July 5th, 2021, 10:49 pm

Bouleversee wrote: "when foreign investors want to put money into the UK, it is a demonstration of confidence in the country's future and should be welcomed.......'.


It's a sign that the UK market is relatively good value compared to other markets.


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