Morrisons (MRW)

[dealtn]

I am angry with the Board for buckling so quickly and not doing enough to confound the day traders and algorithms which manipulate the s.p. to such a low level. If the company were not worth more, nobody would want to take thrm over.

The price hasn't been at these levels for 2 1/2 years. If you think "day traders and algorithms" are able to "manipulate" a share price for that length of time, and to that degree, I don't think there is much I can say to convince you otherwise.

A takeover often happens because a company is relatively too cheap. Often it is too cheap because market fashions caused money to flow to other companies or asset classes.
Morrisons are a value style investment and value investing has been deeply out of favour in the last several years.

I think Morrisons are worth somewhat more than the 252+2p bid and probably within a week or two there will be a higher bid on the table.

With all the property plus a reasonable business operating from it, there is a lot of potential to sell and lease-back all the assets, then load the business with debt while extracting cash, window dress the accounts to show how well the business was doing under its new owners, then in several years time float it back onto the stock market for the same as it cost to buy, having pocketed the value of all its previous assets and some cash flows/dividends along the way.

I think buying the whole business at 254p, someone can make a 100% profit on this over the next several years.

I don't disagree. (Apart from the "window dress"(ing) the accounts bit).

[dealtn]

The price hasn't been at these levels for 2 1/2 years. If you think "day traders and algorithms" are able to "manipulate" a share price for that length of time, and to that degree, I don't think there is much I can say to convince you otherwise.

A takeover often happens because a company is relatively too cheap. Often it is too cheap because market fashions caused money to flow to other companies or asset classes.
Morrisons are a value style investment and value investing has been deeply out of favour in the last several years.

I think Morrisons are worth somewhat more than the 252+2p bid and probably within a week or two there will be a higher bid on the table.

With all the property plus a reasonable business operating from it, there is a lot of potential to sell and lease-back all the assets, then load the business with debt while extracting cash, window dress the accounts to show how well the business was doing under its new owners, then in several years time float it back onto the stock market for the same as it cost to buy, having pocketed the value of all its previous assets and some cash flows/dividends along the way.

I think by buying the whole business at 254p, one of these big funds can make a 100% profit on this over the next several years.

I agree, it's absolutely appalling and highly likely that the business will go the same way as Debenhams which suffered the exact same thing. It's the employees and local communities that I feel bad for. Shareholders should be well aware of the risks they are taking.

RVF

Where did you see the end game for Debenhams if it hadn't been taken over? Thriving? From recall I don't think the pre-takeover Debenhams was a particularly good business and likely to deliver a high street offering in demand today either. Those employees and local communities might have outcomes not too dissimilar.

Without the "motivator" of requiring success to ensure takeovers weren't a potential end game how driven do you think Boards of Directors, and managers, would be in delivering change and improvement. How would that lack of "competition" or "capitalism" look for the employees and local communities?

I am of the view Schumpeterian creative destruction, and the threat of outsider takeover is a positive force for good at the societal level. It is rarely considered in such a macro way though, but constantly criticised at the (negative) micro one.

[BT63]

I agree, it's absolutely appalling and highly likely that the business will go the same way as Debenhams which suffered the exact same thing. It's the employees and local communities that I feel bad for. Shareholders should be well aware of the risks they are taking.
RVF

Yes, it is sad and I had Debenhams in mind when I wrote my reply.

However, as investors, isn't that what we try to do; buy low/undervalued and sell high/overvalued?

You can't blame them for trying to make money out of market mis-pricing.

Perhaps the board of Morrisons should be criticised for not releasing some of the value to shareholders.

[88V8]

I am of the view Schumpeterian creative destruction, and the threat of outsider takeover is a positive force for good at the societal level. It is rarely considered in such a macro way though, but constantly criticised at the (negative) micro one.

Never heard of Joseph Schumpeter.

On the macro level, the advent of supermarkets destroyed thousands of local businesses. Bakers, grocers, butchers, etc etc.

Schumpeter died in 1950, before supermarkets got off the ground in the UK. I suppose he would have approved.
I preferred Cullens, and the butchers with sawdust on the floor.

Never been in a Morrisons. Someone said they have muzak. That would be enough to put me off.

V8

[Bouleversee]

According to ST article, JO Hambro, which owns 3% of the shares, said the Board should engage with an offer of 270p per share. It will be interesting to see what happens next. Not much time before the meeting for other interested parties to get their act together.

[ayshfm1]

I think Morrisons management signed their own death warrant with the bonus' they decided to award themselves. The message the shareholders sent out when they voted against it was simple, we do not view this management team we would support. Predators then knew it was just a matter of providing a reasonable price.

Hopefully other greedy managements will learn, a sky bonus' must be earned, not fudged.

[Dod101]

I agree, it's absolutely appalling and highly likely that the business will go the same way as Debenhams which suffered the exact same thing. It's the employees and local communities that I feel bad for. Shareholders should be well aware of the risks they are taking.

I am jumping in here rather late but I see no risk of Morrisons going the way of Debenhams. Food shopping is very different from the stuff that Debenhams tried to sell. The High Street for fashion seems to be dominated at least in the provinces by Primark at one end and Next at the other even if Next is not exactly high fashion. Plus of course the elephant in the room which is online shopping.

Apart from anything else, competition will keep Morrisons, Tesco, Sainsbury and Asda going I think, whether publicly owned or private.

Dod

[idpickering]

Morrisons shares expected to surge as private equity groups circle

The New York-based private equity group Apollo Global Management is among the potential counter-bidders circling Morrisons after the supermarket group recommended a £6.3bn offer from an American consortium over the weekend.

Shares in Morrisons are expected to surge on Monday following the acceptance of an offer led by the US investment fund Fortress, the owner of Majestic Wine. Apollo has appointed the investment bank Morgan Stanley to advise on a potential offer, while rival buyout firm Clayton, Dubilier & Rice (CD&R) is considering whether to launch a renewed bid after having an offer rejected by the board.

https://www.theguardian.com/business/20 ... upermarket

[Arborbridge]

I'm bemoaning not so much the individuals as the extreme form of capitalist ethos that allows such things to happen. It allows a great deal of "unfairness" to develop in society such that only might is right without any regards for the good of society. Unfettered capitalism without tight regulation is a unpleasant and undesirable fact.

Arb.

What is it that you are actually bemoaning? That the price is not high enough, or that you would prefer to hold a low performing business or the loss of the dividends? We cannot regulate against this sort of thing or you will have an economy directed like the attempts by politicians such as Harold Wilson and we know that that simply does not work.

Dod

I'm having a rant, that's all. 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. Entirely human reaction, I'm sure you would agree. Morrisons is one of the better run stores and its employees and shareholders deserve better than to be taken over by what amounts to a property company in a price dip when trading at stores could and will continue to be satisfactory and likewise dividends presumably.

I know capitalism thrives on this type of "renewal" (advisedly in quotes) but we've lost some good companies in the past to these sorts of critters. Cadburys no longer the great British Cadburys, Tate and Lyle no longer the great British company it was (indeed we are frequently confused about who the heck they are). Rowntrees anyone? It seems we live in a world of smoke mirrors and illusions driven by a market of magicians where nothing is what it seems any more.

Is a Mars bar even truly a Mars bar? Is a pint of your favourite beer really what you think it is or always was? We live in a world of corporate scoundrels, lies and illusions.

Rant over

[Dod101]

I'm bemoaning not so much the individuals as the extreme form of capitalist ethos that allows such things to happen. It allows a great deal of "unfairness" to develop in society such that only might is right without any regards for the good of society. Unfettered capitalism without tight regulation is a unpleasant and undesirable fact.

Arb.

What is it that you are actually bemoaning? That the price is not high enough, or that you would prefer to hold a low performing business or the loss of the dividends? We cannot regulate against this sort of thing or you will have an economy directed like the attempts by politicians such as Harold Wilson and we know that that simply does not work.

Dod

I'm having a rant, that's all. 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. Entirely human reaction, I'm sure you would agree. Morrisons is one of the better run stores and its employees and shareholders deserve better than to be taken over by what amounts to a property company in a price dip when trading at stores could and will continue to be satisfactory and likewise dividends presumably.

I know capitalism thrives on this type of "renewal" (advisedly in quotes) but we've lost some good companies in the past to these sorts of critters. Cadburys no longer the great British Cadburys, Tate and Lyle no longer the great British company it was (indeed we are frequently confused about who the heck they are). Rowntrees anyone? It seems we live in a world of smoke mirrors and illusions driven by a market of magicians where nothing is what it seems any more.

Is a Mars bar even truly a Mars bar? Is a pint of your favourite beer really what you think it is or always was? We live in a world of corporate scoundrels, lies and illusions.

Rant over

I understand your rant but why is it that we are not doing the asset stripping? I do not know the answer to that and it is a serious question. From a pure investor's point of view, the supermarkets have never been much good.

Dod

[dealtn]

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.

[Arborbridge]

I understand your rant but why is it that we are not doing the asset stripping? I do not know the answer to that and it is a serious question. From a pure investor's point of view, the supermarkets have never been much good.

Dod

Why would I want to do the assets stripping? I'm interested in a long term sustainable company which pays dividends and decent salaries, etc not a shell.

[Fluke]

The price is up at around 267 this morning in anticipation of a new/renewed bid.

What to do...

[Arborbridge]

What is it that you are actually bemoaning? That the price is not high enough, or that you would prefer to hold a low performing business or the loss of the dividends? We cannot regulate against this sort of thing or you will have an economy directed like the attempts by politicians such as Harold Wilson and we know that that simply does not work.

Dod

I'm having a rant, that's all. 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. Entirely human reaction, I'm sure you would agree. Morrisons is one of the better run stores and its employees and shareholders deserve better than to be taken over by what amounts to a property company in a price dip when trading at stores could and will continue to be satisfactory and likewise dividends presumably.

I know capitalism thrives on this type of "renewal" (advisedly in quotes) but we've lost some good companies in the past to these sorts of critters. Cadburys no longer the great British Cadburys, Tate and Lyle no longer the great British company it was (indeed we are frequently confused about who the heck they are). Rowntrees anyone? It seems we live in a world of smoke mirrors and illusions driven by a market of magicians where nothing is what it seems any more.

Is a Mars bar even truly a Mars bar? Is a pint of your favourite beer really what you think it is or always was? We live in a world of corporate scoundrels, lies and illusions.

Rant over

I understand your rant but why is it that we are not doing the asset stripping? I do not know the answer to that and it is a serious question. From a pure investor's point of view, the supermarkets have never been much good.

Dod

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!

[Dod101]

I understand your rant but why is it that we are not doing the asset stripping? I do not know the answer to that and it is a serious question. From a pure investor's point of view, the supermarkets have never been much good.

Dod

Why would I want to do the assets stripping? I'm interested in a long term sustainable company which pays dividends and decent salaries, etc not a shell.

What I meant was why are we, the British, not doing the asset stripping ourselves or at least turning the tables on the predators? It is a serious question and not aimed at you personally. Is it that say the US supermarkets are run much more efficiently than ours? Does the US have laws outlawing that sort of thing? Do we not have the financial clout? There must surely be answers to these questions and other similar ones surely? There must be lessons to be learnt.

The UK welcomes overseas investment, car factories in Sunderland, the new owners of Canary Wharf and so on so it is not the inward investment that we do not welcome it is the actual business practices pursued by the new owners. However, the bidders for Morrison say they are not interested in a sale and leaseback of the stores but they seem to be considering that with the distribution centres, whose prices are currently sky high. If it is a good idea why were Morrisons not doing that themselves? After all although they need the use of these centres, they have no need to own them. We all of course know there are two sides to the ownership v rental model but do these companies actually look at that?

Dod

[Dod101]

The price is up at around 267 this morning in anticipation of a new/renewed bid.

What to do...

Sit tight. What a good position to be in.

Dod

[Dod101]

[

I understand your rant but why is it that we are not doing the asset stripping? I do not know the answer to that and it is a serious question. From a pure investor's point of view, the supermarkets have never been much good.

Dod

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

[simoan]

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

[Arborbridge]

[

I understand your rant but why is it that we are not doing the asset stripping? I do not know the answer to that and it is a serious question. From a pure investor's point of view, the supermarkets have never been much good.

Dod

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.

[Arborbridge]

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

Sale and leaseback? - The Devil's work, Get thee behind me

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.