The Morrisons takeover proposal is nothing but bad news for staff

With a £5.5bn takeover proposal on the table, Morrisons shares started the week on a huge high, with some media commentators going so far as to suggest America’s private equity barons could perform a supermarket sweep of the entire sector up to and including even Tesco.

Bid battles, fat cat Americans with bin bags full of dollars, bankers, mergers and acquisitions, yay!

I’m sorry, but the stink from this whole thing is worse than what you’ll experience through living next door to a rendering plant.

The correct response to Clayton, Dubilier & Rice’s debt-fuelled pop at Britain’s number four supermarket chain is not excitement. Far from it. It’s deep concern. A measure of disgust wouldn’t be inappropriate.

If Morrisons does get taken out – and it now looks highly vulnerable – there will likely be many more losers than there are winners.

You can start with the thousands of people working there, people whose concerns rarely get much more than a sotto voce mention at times like this.

Following the widespread public recognition that the people operating the tills and stacking the shelves put their very lives at risk turning up to work during the pandemic, Morrisons took a genuinely groundbreaking step earlier this year when it became the first UK supermarket to guarantee staff wages of at least £10 an hour.

A little of the PR gloss was knocked off the announcement when it then went and proposed an unconscionable bonus for the already handsomely rewarded CEO David Potts.

The group’s fiddling with the calculations to fatten it up – the remuneration committee basically ignored the Covid-driven profit slump the grocer experienced – was enough for even some of the City’s more somnolent institutional investors to cry foul and the remuneration report was rejected by 70 per cent of them. Shame the vote was only advisory.

Thing is, a Morrison in private (equity) hands wouldn’t even be subject to that (low) level of accountability when it comes to executive rewards.

But we’ll surely hear about the impact on workers’ pay, and it’s hard not to be gravely concerned about Morrisons’ status as Britain’s top-paying supermarket group going forward.

The group doesn’t have a lot of debt at the moment. One way of servicing the mountain of it that it will be saddled with after a successful bid while still making a profit is by squeezing its staff.

Downgrading their terms and conditions, sacking them where possible. Putting a lid on their wages. You know the drill. We’ve seen this happen before. (PS... Hitting staff inevitably short changes customers, who are quite well served by Morrisons as things stand.)

The other trick is what’s known as “financial engineering”. This includes wheezes such as selling off the property – Morrisons owns most of its freeholds – for a quick buck before leasing it back. This sort of thing can have painful long-term consequences for a business but the people who engage in it rarely stick around for long enough to have to worry about them.

You can expect some of that too.

Resisting this depends on the grocer’s directors showing the sort of steely resolve that those in their position rarely do.

They are now under a great deal of pressure, partly as a result of news of what amounts to a tired old private equity trick getting out.

You spot an undervalued asset – and Morrisons is that. You then have your cake and eat it by crafting a proposal, this is not a formal bid remember, which you make subject to a list of conditions including getting privileged access to the books.

If the board won’t play footsie after you submit it, not to worry. News of these things has a habit of working its way into the public domain (as this did over the weekend). The shares inevitably go bananas, as Morrisons’ have, the hedge funds dive in, hoping to turn a quick buck, and the board starts to look outgunned.

If this works the oracle, shame on the City’s big investors, as well as on Morrisons directors, because it will serve as proof that precisely nothing has been learned since the last private equity takeover wave hit.

During that time, companies would be bought off the market on the cheap, loaded up with debt and brutally squeezed before being sold back to the public markets at a tidy profit with decidedly mixed results.

Debenhams, now no more than a brand atop a website, was the poster child for how badly it could all turn out, but there was blood all over the carpet wherever you looked.

No good can come of this, other than for a few handfuls of plutocrats.

It speaks volumes that Amazon riding in on a fiery charger might actually be the least bad option if Morrisons caves.

But even if team Bezos does that, the prospects for the group’s workers don’t look pretty.

This is a shabby, shabby way to reward people who rolled the dice with their health, and sometimes their lives to “keep the nation fed” while the people pulling the levers of control mostly stayed safe in their fancy homes.