Clayton, Dubilier & Rice (CD&R) is the shadowy US suitor currently attempting to take over one of the UK's biggest grocery chains.
Having been rejected by Morrisons (MRW.L) over the weekend, following a £5.5bn ($7.6bn) bid last week, reports circulated this morning that the private equity house wasn't done yet.
The approach sent Morrisons' stock soaring — bumped more than 30% shortly after the opening bell in London on Monday.
CD&R has released a statement confirming that under takeover rules it has until 17 July to firm up its intentions.
So, who is the behemoth trying to take Morrisons private?
Founded in 1978, CD&R is one of the oldest private equity houses on the market, and now has more than $30bn (£22bn) invested in a businesses across multiple different industries. With offices in New York and London, it says it has an aggregate transaction value in excess of $140bn.
As of December 2020, it had 34 portfolio companies and in turn 225,000 portfolio company employees, $60bn in portfolio company revenues and around 500 limited partners.
The firm bills its origins as having been an upstart without a specific motivation, writing on its website that "it wasn’t really a business but a personal effort by a close-knit group, which wasn’t exactly sure where it was headed, but shared a sense of common values and a conviction that combining operating and financial skills would produce better investment results.”
Now, it is a heavyweight of the private equity world and regularly swoops for household names.
In 1983, the Firm acquired Harris Graphics in what was, at the time, the largest ever corporate divestiture accomplished through a private equity structure. Divestiture is the act of disposing of an asset through sale, exchange, or closure.
Two years later, it had cemented its reputation as a heavyweight for being a constructive partner to corporations by acting as a “white knight,” helping US rubber company Uniroyal fend off a hostile activist investor.
In 1991, IBM (IBM) selected CD&R to carve out its printer and supplies business lines, which became laser printer company Lexmark.
CD&R also might be known for its acquisition and disposal of car rental company Hertz. The $15bn private equity deal that took Hertz private in 2005, led by CD&R, was the second-biggest on record. Not only this, but it was one of the shortest periods a company has spent in private hands. Nine months later, Hertz returned to the stock market.
The private ownership added mountains of debt to Hertz balance sheet and Moody's cut its rating to junk.
CD&R noted its successes at Hertz as improving operating efficiencies, changing the way the company bought and sold cars and creating a flexible capital structure that withstood the great recession
In a 2020 piece in the Financial Times on America's snowballing debt addiction, the firm was characterised as having "put together leveraged buyouts as if they were running an assembly line."
Execs and investors
CD&R counts corporate heavyweights among its top brass, with a certain pedigree in the British grocery trade. In 2011, Sir Terry Leahy, former CEO of Tesco (TSCO.L) became a senior advisor to the firm.
Sir Leahy was the executive who helped guide Tesco to £2bn in profits in 2005, and at the time hit back against protest that the company had become "too successful". During his tenure Tesco's market share grew from 20% to 30%.
He has been paid £8.4m in performance-related bonuses since his departure in 2010 on top of a pension pot that as reportedly worth £18.4m when he left.
Among others, the firm has hired from Disney, Emerson Electric, GAP, GE, IBM, PepsiCo, Procter & Gamble and Unilever.
Many of these executives joined the Firm's London office, which opened in 1998, as CD&R built up its European capabilities and track record.
The majority of its investors are US-based, with an equal share of the pie residing in Asia and Europe, its next two biggest regions. These include pension funds, high net worth and family offices, sovereign funds, funds of funds and insurance companies.
Other recent deals
Earlier this month CD&R bought data cloud company Cloudera with KKR in an all-cash transaction valued at $5.3bn.
Cloudera shareholders received $16 in cash per share, representing a 24% premium to the closing price as of May 28, 2021 and a 30% premium to the 30-day volume weighted average share price.
Earlier this year it also sold management consulting company Capco for $1.45bn.
At the beginning of the year it also swooped for UK plumbing and climate products firm Wolseley in a £308m divestiture transaction.
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