Anyone know how the CD&R consortium plans to create value at Morrisons? Just astounding to me that they could pay 61% above the level public markets were valuing the equity and still expect to make PE-level returns. Anyone have any insights into what their business plan is?
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With so much dry powder in PE today, the plan is buy high with lots of leverage -> Repay debt with cash flows -> Sell at basically the same price but hopefully with less debt -> mediocre equity returns
Also cut a LOT of costs. Not unusual to underwrite debt right now with $200M in identifiable costs. Which feeds direct to EBITDA.
Lots of value in the real estate there….
Agreed, it’s very much the value in the Real Estate they are looking to capitalise on
If the real estate is a large component of the value add, couldn't Morrisons have done a sale leaseback of their real estate themselves?
Yes they could have. But now shareholders get a 61% premium to not worry about putting in that effort basically.
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