The Guardian view on Morrisons: for sale, one supermarket chain, very careful owners
It shouldn’t take a bidding battle to realise that it matters who owns our firms and how they are run
Last modified on Wed 7 Jul 2021 14.08 EDT
It seems particularly ironic that one of the biggest takeover battles in years – a trio of American private equity firms tussling over who gets to buy supermarket chain Morrisons – should coincide with Wimbledon. For decades, economists defending the British model of capitalism would liken it to the summer fortnight in SW19 during which the UK hosted the world’s best tennis talent – almost none of which was homegrown. They even called it the “Wimbledon effect”. So what if the City was largely owned by Americans, the trains run by Germans and major airports in Spanish hands? The UK didn’t do national champions in business any more than it expected Tim Henman to beat Goran Ivanišević.
That is clearly changing. Kwasi Kwarteng, the business secretary and typically an avid free-marketeer, has this week demanded a meeting with Morrisons’ top brass over the £9.5bn bid that it has commended to shareholders. The buyout firm leading that offer, Fortress, has taken the unusual step of issuing a long letter full of commitments to the supermarket’s employees, suppliers and pensioners. The pledges are stuffed with phrases such as “fully supportive”, “does not intend” and “does not anticipate”. No doubt Fortress comes armed with the best of intentions; it evidently also employs diligent lawyers.
There are issues here that go far beyond whether the company’s bosses have accents from Bradford or Boston. Morrisons is a firm marked by unusual continuity. William Morrison began selling eggs and butter in 1899; his son Ken took over the business in 1952 and only retired as its patriarch in 2008. Moreover, it runs a very different business model from competitors. It directly owns and runs its meat processing operations as well as its own farms and fishing fleets. A study of British food production from academics at the Centre for Research on Socio-Cultural Change in 2012 described Morrisons as showing “it is possible within the UK to behave as a socially responsible vertically integrated processor, source more British produce, and do so while competing on price in the mass market with the ‘big three’ major supermarkets”.
The private equity sector is a stranger to such specialisation and to operating over a 50-year horizon. Its traditional focus is financial engineering: on getting costs down, whether that be cutting staff or taxes, extracting profits and then cashing out. The signal case in the UK is how Boots, a chemist founded by Methodists in the 1840s, was bought by a consortium of investors in 2007 for £11bn – almost £9bn of which was borrowed and then put on the company’s own balance sheet. Within a few months of the sale, the headquarters was shifted from Nottingham to low-tax Zug in Switzerland. It is now run out of Illinois.
It should not require a takeover for politicians and regulators to consider who owns our companies and how they are run. Every major business in the UK relies upon Britain’s infrastructure for transport, health and education for staff, and legal protection, including limited liability. Two questions not asked enough in Westminster are what the public gets in return, and whether that is enough. The British don’t need to win Wimbledon, but they can at least ensure the benefits of hosting it are shared out fairly.
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