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FTSE set to fall despite hopes of private equity takeovers

written by Bella Palmer
private-equity

At the weekend, supermarket giant Morrisons rejected a bid from Clayton Dubillier & Rice priced at 230p

UK’s FTSE 100 is set for a sharp fall today despite a takeover bid for Morrisons sparking hopes of a new rush of private equity takeovers of UK companies.

Wall Street’s sharp decline on Friday night was likely to spill over to London, getting the week off to a negative start, dropping below the 7000 mark.

Japan led the decline in Asian markets, dropping more than 3%.

Supermarket giant Morrisons at the weekend rejected a bid from Clayton Dubillier & Rice priced at 230p - a 29% premium to the grocer’s share price on Friday night.

The board declared the offer “significantly undervalued” the business.

Its shares were expected to soar today as various analysts proposed what they considered would be a knockout price, with some saying shareholders would want the board to at least engage in talks at 245p with 280p being likely to win support.

David Potts, the chief executive, has turned the business around since arriving in 2015 but the markets are opting for online players like Ocado and Amazon in the hunt for share price growth.

It raises the prospect of other takeover approaches from wealthy private equity funds, which have built up warchests of billions of pounds from pension funds and other investors hunting for returns in the current low-interest rate environment.

Fresh bids could come in for Morrisons and rivals Tesco and Sainsbury, some speculated.

There have already been nearly 123 public-to-private takeovers this year and shares in grocers are likely to gain after the Morrisons tilt.

Elsewhere, though, financial markets remain jittery. Today was set to be a negative day, with the FTSE 100 being called down 48 points to 6962.

Markets have been reacting recently to the shift in the US Federal Reserve’s stance as it projected rate hikes sooner than expected.

St Louis Fed president James Bullard said he was leaning towards recommending a rate rise in 2022, which served to undermine the Fed’s consistent narrative of lower-for-longer.

Until now, the central bank was firm on its argument that it has to keep things easy until unemployment falls significantly. There are still millions more Americans unemployed now than there were before the pandemic struck.

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