Morrisons (MRW)

[stockton]

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.

And, in that alternative world, the moon might be made of cheese.

[Arborbridge]

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

I read that, but I'm not sure such an undertaking can be made permanently. Are we being naive to believe that a property company would be content to leave it at that ad infinitum? Their long term interest would be in asset stripping the property as a separate property company and make a small fortune.

They have little or no interest in the stakeholders of this business, the existing shareholders, customers or farms - only in as far as they can squeeze all of them until the pips squeak. They'll wring it dry over a period.

This is nothing to do with enlightened capitalism but raw greed to make a fast buck.

To those who have written that I should be happy to have a premium price to the current depressed price, I can only say, that isn't particularly interesting to me as a HYPer. The dividends for MRW have been up and down according to market conditions, but they are at present increasing and I've no doubt the SP will follow when the market slowly realises it. Most HYP companies have gone through various stages like this, but that doesn't bother me as I am here for the long term: the investment is not for churning.

Of course, I don't deny MRW has not been the best investment, but that does not mean my patience has worn thin, especially not when all UK businesses clearly have problems of various sorts during Brexit/covid. The takeover is a curate's egg: on the one hand it is an example of market trading which gives the opportunity to refresh. On the other it's a wretched nuisance which goes wholly against the grain for a LTBH HYPer whose interest is only or mainly in the income over the long term.
I don't give much thought to the short term ups or downs of the share price: saying that I have a 40% premium to the currently depressed price means nothing to me (since I believe it will recover anyway of its own accord, and since I never intended to sell and realise that capital value) - except that someone knows a bargain when they see one and that tells me the management are useful fools to the predators and do not have the interest of stakeholders at heart.

Arb.

[Arborbridge]

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.

I wonder which companies have benefitted in the way you say? I haven't noticed Boots being any "better" than it was. It would be interesting to know more insider details there, but I'd be surprised if the Boots company as a whole including it's various stakeholders were any better off. And Cadburys takeover: who did that benefit? The products are if anything, the cheapest and nastiest they've ever been

Arb.

[Lootman]

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.

I wonder which companies have benefitted in the way you say? I haven't noticed Boots being any "better" than it was. It would be interesting to know more insider details there, but I'd be surprised if the Boots company as a whole including it's various stakeholders were any better off. And Cadburys takeover: who did that benefit? The products are if anything, the cheapest and nastiest they've ever been

Former Cadburys shareholders who switched to Kraft certainly did well - they are up 550% to date since the 2010 takeover.

As for Walgreens takeover of Boots, it may not be any better now, but is it any worse? Walgreens is in exactly the same business as Boots so I would not have expected big changes.

As for UK supermarket companies, they have been dead money for a long time now, so a shakeup is welcome. Is Asda any worse for being bought by WalMart? And as investors should we even care about that as long as we get an outsized return as a result?

[Arborbridge]

As for Walgreens takeover of Boots, it may not be any better now, but is it any worse?

As for UK supermarket companies, they have been dead money for a long time now, so a shakeup is welcome. Is Asda any worse for being bought by WalMart? And as investors should we even care about that as long as we get an outsized return as a result?

Boots: not any worse is damning the takeover with faint praise. That's not a good enough reason to make an elite group rich when others may have been dispossessed.

And as investors we should care about the ethical dimension: it is not just about getting outsized returns. There's a fundamental difference in approach here and your hard nosed American side is showing. I fully acknowledge that "ethics" is a complex and difficult issue on which posters here will be divided. This ranges from whole notion of shareholding is unethical to many to anything goes believed by some, probably a minority even amongst Tory voters and MPs.

For preference, I would rather see a company which pays a great deal of attention to the well being of its employees and other stake holders - that includes the environment and local communities too - than give me a purely get rich quick option. Provided I eke out enough to live moderately comfortably, I am happy to see the other persons benefit likewise. I am not at all interested in screwing them to make myself richer: the best society is one in which each party benefits sufficiently to lead a civilised and fulfilling life. This is what is normally called enlightened self interest. Indeed, it is also the more recent interation of capitalism as practiced, with the concern (sometimes only lip-service) for all stakeholders by company boards to the eventual benefit of all.

This is not the thread to continue this interesting line of discussion - and in any case we would never agree


Arb.

[Dod101]

Actually Arb, it may be that the ethical side of it (ESG as it seems to be called these days) will gain more prominence and reading a report in my newspaper this morning, it is almost implying that this is one of the reasons that the Directors recommended the current bid. It seems likely though for other bids to appear with or without the undertakings apparently given by Fortress. It will then be interesting to see whether the money will prove the real draw.

The real trouble is that we live in a capitalist society not a socialist paradise.

Dod

[stockton]

The real trouble is that we live in a capitalist society not a socialist paradise.
Dod

Not sure that it has anything to do with capitalism or socialism. In my ideal world mere money managers would be prevented from voting about the future of companies because their incentives differ substantially from the public interest.

[Arborbridge]

The real trouble is that we live in a capitalist society not a socialist paradise.

Dod

I'm not one for the idea of socialist paradises - they don't/can't exist as far as I can see. Capitalism in which is highly regulated in a democracy with the good of the majority at its heart is the better alternative. Although I don't mean by that, "popularism" which is just another form of mob rule.

Oh dear, this has gone right OT, which I didn't intend, interesting though it is to continue

Best not to....

[stockton]

Given that the discussion has made it to the papers is there any reason to discontinue ? It would be quite a revolution if the bid simply failed.
https://www.theguardian.com/business/20 ... d-fortress

[Arborbridge]

Given that the discussion has made it to the papers is there any reason to discontinue ? It would be quite a revolution if the bid simply failed.
https://www.theguardian.com/business/20 ... d-fortress

“As responsible stewards of our clients capital, it is important that the company isn’t taken over for the wrong reasons,” said Andrew Koch, a senior fund manager at LGIM, in a statement. “If an acquirer makes strong returns this should come from making the company a better business. It should not come from buying its property portfolio too cheaply, levering the company up with debt, and potentially reducing the tax paid to the exchequer.”

Thank goodness, some fund managers have more than a neanderthal brain. I hope this will further promote the acceptable face of capitalism that some are crying out for.


Arb.

[88V8]

https://www.theguardian.com/business/2021/jul/05/morrisons-takeover-apollo-bid-fortress

Legal & General Investment Management (LGIM) said that potential buyers should not buy Morrisons to take advantage of a possibly undervalued property portfolio, to load it up with debt, or to cut its tax bill, in comments that appeared to criticise practices commonly associated with the private equity industry.

L&G have come over a bit Aunty Ethical lately...
There is nothing special about Morrisons. We're not talking Waitrose...
If there are obvious and viable routes to improving shareholder returns then the Board should be taking them.

Loading up with debt - something BoJo seems rather keen on for UK Plc - is unlikely to be a good idea long-term so I hope that would not be the route to riches that a buyer might plan. It would be a shame if the company ultimately disappeared.
But the company's real estate is an asset that can legitimately be exploited.

As retail shareholders we have nil influence over a company's ethics. The shares don't know we own them and neither does the company. My view is that we should maximise our returns and then if we wish exercise our ethical preference by giving any surplus to charity.
My ethics - if I allowed them to steer my investing - would not sit well with selling fags, booze and unhealthy food, which is exactly what supermarkets do.

V8

[Arborbridge]

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.

God preserve us from forensic analysts, in that case, that know the value of nothing but beans. Soulless bean counters have their place, and they should be firmly shut away into it whilst people who understand the greater needs of society make the decisions.

Read what the guy from Lgeal and General said: at least they have a tiny incling of the wider issues.

And, by the way -someone is going to be well healed after this even if you maintain (erroneously) they aren't already. A billion or so will eventually be realised by these opportunistic scoundrels who care for nought (or preferably nine noughts) but masses of lolly while dismantling a grand company.

And in case you haven't got the message, I'm interested in income rather than capital. Within limits, the price of the shares is not relevant to someone who never intends to sell. I'm not arguing that Morrisons or any other company in that sector are the best thing since sliced bread, but they are hardly a basket cases and over time the income will recover and keep churning out and that's all I need. It's too big an essential sector to ignore entirely.

Arb.

[dealtn]

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.

God preserve us from forensic analysts, in that case, that know the value of nothing but beans. Soulless bean counters have their place, and they should be firmly shut away into it whilst people who understand the greater needs of society make the decisions.

Read what the guy from Lgeal and General said: at least they have a tiny incling of the wider issues.

And, by the way -someone is going to be well healed after this even if you maintain (erroneously) they aren't already. A billion or so will eventually be realised by these opportunistic scoundrels who care for nought (or preferably nine noughts) but masses of lolly while dismantling a grand company.

And in case you haven't got the message, I'm interested in income rather than capital. Within limits, the price of the shares is not relevant to someone who never intends to sell. I'm not arguing that Morrisons or any other company in that sector are the best thing since sliced bread, but they are hardly a basket cases and over time the income will recover and keep churning out and that's all I need. It's too big an essential sector to ignore entirely.

Arb.

You are by many times more magnitude emotional about this than me. It is hard to agree with much of what you say or believe.

Even disregarding the societal aspects I really can't get my head around even the personal aspects. In a sentence you describe yourself as only being interested in income, and literally in the very next claim the price of shares is of no relevance to you (within limits - whatever that means). Yet if you have £10,000 earning 5% and the next day someone is giving you £15,000 you claim that is irrelevant, despite the fact you can now reinvest that sum at any yield >3.34% and improve that income - the only thing you claim to be interested in.

It's not any kind of investment strategy I can ever imagine following.

[Arborbridge]

Even disregarding the societal aspects I really can't get my head around even the personal aspects. In a sentence you describe yourself as only being interested in income, and literally in the very next claim the price of shares is of no relevance to you (within limits - whatever that means). Yet if you have £10,000 earning 5% and the next day someone is giving you £15,000 you claim that is irrelevant, despite the fact you can now reinvest that sum at any yield >3.34% and improve that income - the only thing you claim to be interested in.

It's not any kind of investment strategy I can ever imagine following.

Then I guess you will never be a HYPer nor understand the HYP philosophy. This can't be a surprise to you - you've been around these boards long enough to know the difference between HYP investing and the more usual types - so maybe this discussion has no further use in that regard.

But as regards the factorsaround takeovers, I believe there are some truths worth considering in looking at the wider issues rather than the narrow "am I making a killing" aspect. If people or intstitutions do not consider some of the wider elements when they make decisions - if those decisions are left in the hands of forensic bean counters - then that explains some of the troubles we have in society generally. Some in those institutions would say "not my problem" but those higher up, or highest up, the decision making pile should be acting in a more responsible way than the forensic guys who supply the data. Highest of all, of course, are the government and regulators who should be getting the best for society generally and curbing the greed tendency of the those who tend to think about nothing except the pay off they will receive.

Arb.

[dealtn]

Even disregarding the societal aspects I really can't get my head around even the personal aspects. In a sentence you describe yourself as only being interested in income, and literally in the very next claim the price of shares is of no relevance to you (within limits - whatever that means). Yet if you have £10,000 earning 5% and the next day someone is giving you £15,000 you claim that is irrelevant, despite the fact you can now reinvest that sum at any yield >3.34% and improve that income - the only thing you claim to be interested in.

It's not any kind of investment strategy I can ever imagine following.

Then I guess you will never be a HYPer nor understand the HYP philosophy. This can't be a surprise to you - you've been around these boards long enough to know the difference between HYP investing and the more usual types - so maybe this discussion has no further use in that regard.

But as regards the factorsaround takeovers, I believe there are some truths worth considering in looking at the wider issues rather than the narrow "am I making a killing" aspect. If people or intstitutions do not consider some of the wider elements when they make decisions - if those decisions are left in the hands of forensic bean counters - then that explains some of the troubles we have in society generally. Some in those institutions would say "not my problem" but those higher up, or highest up, the decision making pile should be acting in a more responsible way than the forensic guys who supply the data. Highest of all, of course, are the government and regulators who should be getting the best for society generally and curbing the greed tendency of the those who tend to think about nothing except the pay off they will receive.

Arb.

Firstly this isn't a HYP Board or HYP discussion. Feel free to have that elsewhere, but I won't be joining you. This is a Company News thread.

However we aren't living in a vacuum. There is a government, and a set of rules about how capitalism works, and takeovers generally. Where is your evidence this bidder, or any other, isn't adhering to those?

[Dod101]

In any case all that the Government/Regulators are concerned about is consumer choice and no one has said that Morrisons is going to disappear any more than Asda is. Beyond that I cannot see the regulators taking much interest. It is not a Debenhams which was ailing for years because of the change in the trading pattern for its goods. You can see that in all the High Street department stores.

There is a report in the Times this morning that the property alone could be worth almost £9 billion. IF that is anything like accurate is it any wonder that private equity merchants are circling it? I never go near Morrisons but even if I did I doubt that it would make much difference to my experience as a shopper.

Sentiment has no place in such matters as Arb must know very well, unless of course you have the financial clout of the Weston family who can do what they like with say Primark because they own it 100% through ABF in which they have a controlling interest. Otherwise raw or otherwise capitalism takes over.

Dod

[Arborbridge]

Firstly this isn't a HYP Board or HYP discussion. Feel free to have that elsewhere, but I won't be joining you. This is a Company News thread.

However we aren't living in a vacuum. There is a government, and a set of rules about how capitalism works, and takeovers generally. Where is your evidence this bidder, or any other, isn't adhering to those?

With all due respect, you have commented on this takeover from your POV as a particular type of investor, and so have I. The difference in approach - I was reminding you - could be due to our different investing styles. To make out that only your POV driven by your invesment approach must be discussed here and not mine is not acceptable in my view. We were both discussing the company news but from differeing standpoints. I will not be censored by you in that way.

Arb.

[Arborbridge]

In any case all that the Government/Regulators are concerned about is consumer choice and no one has said that Morrisons is going to disappear any more than Asda is. Beyond that I cannot see the regulators taking much interest. It is not a Debenhams which was ailing for years because of the change in the trading pattern for its goods. You can see that in all the High Street department stores.

There is a report in the Times this morning that the property alone could be worth almost £9 billion. IF that is anything like accurate is it any wonder that private equity merchants are circling it? I never go near Morrisons but even if I did I doubt that it would make much difference to my experience as a shopper.

Sentiment has no place in such matters as Arb must know very well, unless of course you have the financial clout of the Weston family who can do what they like with say Primark because they own it 100% through ABF in which they have a controlling interest. Otherwise raw or otherwise capitalism takes over.

Dod

Actually, Dod, you are the one who uses sentiment with respect to your comments on shares. Who is it that talks about intangibles such as culture?

[Dod101]

In any case all that the Government/Regulators are concerned about is consumer choice and no one has said that Morrisons is going to disappear any more than Asda is. Beyond that I cannot see the regulators taking much interest. It is not a Debenhams which was ailing for years because of the change in the trading pattern for its goods. You can see that in all the High Street department stores.

There is a report in the Times this morning that the property alone could be worth almost £9 billion. IF that is anything like accurate is it any wonder that private equity merchants are circling it? I never go near Morrisons but even if I did I doubt that it would make much difference to my experience as a shopper.

Sentiment has no place in such matters as Arb must know very well, unless of course you have the financial clout of the Weston family who can do what they like with say Primark because they own it 100% through ABF in which they have a controlling interest. Otherwise raw or otherwise capitalism takes over.

Dod

Actually, Dod, you are the one who uses sentiment with respect to your comments on shares. Who is it that talks about intangibles such as culture?

Of course but culture in the running of a business is not in the least what we are writing about here. Whether I like what the predators are planning is in any case not relevant in any sense.

Dod

[Alaric]

There is a report in the Times this morning that the property alone could be worth almost £9 billion.

You wonder whether they ought not to be reporting some form of segmental analysis. That's where the property assets are either part of a separate company or are reported as if they were. That would however require the supermarket side to pay notional rent to the property side. That could encourage bizarre behaviour where it appeared "cheaper" to abandon an owned site in favour of a rented one.