Morrisons shares surge 34% after takeover approach; China crackdown hits bitcoin – as it happened

Graeme Wearden

from on 2021-06-21 19:10 (#5KAEG)

Rolling coverage of the latest economic and financial news

10.07pm BST

And finally (again) US stocks have posted a strong day of gains, making up lost ground after chunky falls last week.

The Dow snapped a five-day losing streak, its longest since January, while the S&P recorded its first gain in four days - its longest losing streak since February. It was the S&P's best day in about five weeks.

Monday's rebound was the Dow's best performance since early March and is bringing the index back from extremely oversold levels," said analysts at Bespoke Investment Group.

US stocks soared Monday, making up lost ground after a multi-day losing streak last week. The Dow closed 1.8%, or nearly 590 points, higher. The S&P 500 - the broadest measure of Wall Street - climbed 1.4%. The Nasdaq Composite finished up 0.8%. https://t.co/Wft68PC1XX

10.02pm BST

My colleague Nils Pratley has some advice for Morrisons' board, as they face the prospect of a private equity takeover:

If Andrew Higginson, Morrisons' chair, wants to fight for independence, or even just a decent price, he needs to sound more indignant. The late Sir Ken Morrison would have been spitting with fury by now, rallying shareholders to recognise Morrisons' inherent strengths. The few boilerplate words that emerged from the Bradford HQ at the weekend were too timid.

Higginson could try modelling sale-and-leaseback structures of his own, if that's what shareholders want. At least prepare a dossier on the property portfolio, including its farms. And ring Amazon to see if it's interested in buying an equity stake to add to its online partnership deal. David Potts, the chief executive, could do his bit by expanding on his recent refrain about a renaissance" for UK supermarkets. What does he think it means for dividends over the medium-term? Sketch out a few scenarios to switch the focus from the market's soft rating of the entire supermarket sector.

8.10pm BST

And finally... here's our news story on the Morrison's deal:

Britain's largest investor has criticised the 5.5bn takeover bid for Morrisons by a US private equity firm, saying it was not adding any genuine value" as shares in the supermarket group rose by more than one-third.

Legal & General Investment Management (LGIM), the seventh-largest shareholder in Morrisons, raised concerns about the price of the bid from Clayton, Dubilier & Rice as well as the possibility that the suitor could try to sell its shops to generate cash.

8.06pm BST

Part of Sanjeev Gupta's metal empire that faces the threat of administration has asked its bankers to give it time to try to negotiate with four potential buyers.

It is understood that Liberty Aluminium Technologies, a supplier of cast parts to Jaguar Land Rover, could be forced into administration within days if its main bank, Close Brothers, does not agree to give it more time.

7.53pm BST

Back on Wall Street, stocks are continuing to rally.

The Dow is now up 553 points, or 1.6%, at 33,843, as investors show renewed confidence in the reflation trade', and value stocks', after Friday's jitters.

#WSJWhatsNow: U.S. stocks rallied Monday, lifting the Dow 500 points pic.twitter.com/AuggquRlIJ

7.50pm BST

New flexible rail season tickets will disappoint passengers and fail to bring them back to the railway, passenger groups and campaigners have said as the tickets went on sale in England on Monday.

The government scheme is designed to make rail travel cheaper for part-time workers, with more splitting their time between the home and office since the coronavirus pandemic.

Many passengers are going to be disappointed. There's a danger that people will change the way they commute and start driving, and we wanted flexible tickets to encourage people back onboard trains. We don't think these tickets are going to do that or provide the savings that people had hoped for."

7.17pm BST

The heads of the UK's largest business lobby group and two major City employers have warned against giving workers the legal right to demand remote working, claiming it would harm young employees and city centre economies.

Lord Bilimoria, the president of the CBI, said that while employees should be able to request the option of working from home, flexible working arrangements must be allowed to evolve in their own way.

They should have the right to request it. But every employer should make that decision about the mix of working from home [and the office],".

6.52pm BST

Danni Hewson, AJ Bell financial analyst:

After a year of feeding the nation Morrisons looks like it could be the subject of a feeding frenzy after turning down a takeover bid. Shares in the supermarket have ridden the roller coaster of anticipation today ending up 34.6% at 240.20, giving the FTSE 250 a much-needed boost.

The more domestically focussed of London's indices was unsurprisingly downbeat for much of the day that was supposed to be Freedom Day" but rallied after lunch and ended the day up 0.6% at 22,457. Morrisons' rival stores seemed to be living vicariously with investors contemplating the future of the entire sector which increasingly seems to be undervalued with major changes to business practices possibly overlooked by some because of covid costs. Ocado and Sainsbury topped the day's FTSE 100 risers.

This is an interesting crossroads that has huge potential for further market penetration. Whatever the outcome of the inevitable further wooing of the Board, there is a real opportunity to enhance and evolve a successful supermarket formula that already resonates with a strong customer base.

Looking out for the supply chain pitfalls that govern keeping or improving on their pole position is vital to this effort of course."

Morrisons occupies an unusual space in the grocery landscape of the UK, for a couple of reasons. Morrisons still own much of their supply chain all the way back to the producers and farms that supply it, as well as the manufacturing of many of their own-brand goods for stores, which is an asset at a time when supply chains are challenged by a combination of COVID-19 and Brexit. They also have a unique relationship with Amazon, being the supplier of much of the product for Amazon Prime Pantry and their Go store recently opened in London.

When you combine this with their financial situation - trading at almost 1 to 1 book value, yet with a pension surplus and minimal debt and lease commitments, you can see how the business could become a target. I would be surprised if there aren't a number of very hurried discussions taking place with Amazon though, to see if they're looking to launch the Whole Foods brand through a Morrisons acquisition in the UK (despite their current distinct brand positions) or perhaps as a way of accelerating the rollout of the Amazon Grocery store brand. It may just be too soon for Amazon to commit to the UK marketplace though - where they've traditionally preferred a more staggered, test & learn approach, and ultimately I don't believe they're interested in owning such a large amount of real estate. An Amazon offer would almost certainly be preferred by existing shareholders, and the offer could be comparatively cheap for Amazon if they offered an appealing mix of cash and shares rather than a pure cash-buyout.

6.47pm BST

Other cryptocurrencies are also weakening today, alongside bitcoin.

Ether is down around 9% in the last 24 hours, according to Coindesk data, at $1,940, while XRP (used on the Ripple network) has shed over 9% to $0.66.

Dogecoin correction update: -71% since the Musk SNL peak.$DOGE pic.twitter.com/P5CaFNYHWy

Bitcoin needs to expedite transitioning mining out of China. Over the weekend, Bitcoin was under pressure on continued measures against Bitcoin creators in Sichuan, which uses hydropower.

The cryptocurrency mining community is rushing to get out of coal-fired power plants but losing clean energy sources is extra bitter.

6.13pm BST

The blue-chip FTSE 100 also closed higher, up nearly 45 points or 0.65% at 7062 points.

After dropping to a one-month low early this morning, the market recovered and clawed back some of last Friday's 1.9% fall.

5.59pm BST

Rival supermarket chain Sainsbury's also rallied today, finishing up 3.85% at 270.1p.

The private equity bid for Morrisons has created speculation that other supermarkets could also be eyed up. And Czech billionaire Daniel Kretinsky has already been building a stake in Sainsbury's, which reached almost 10% in April.

Unsurprisingly supermarkets have outperformed after the surprise 5.5bn weekend bid from US buyout firm Clayton Dubilier and Rice, for Morrisons.

While the bid was rejected it has given the entire sector a boost in anticipation of a bidding war, not only for Morrison but also for the likes of Sainsbury which has outperformed this year due to Czech billionaire Daniel Kretinsky increasing his stake in the business, while Tesco has become much cheaper since it returned over 5bn to shareholders in February.

5.31pm BST

Shares in WM Morrisons have closed 34% higher tonight, at 240.2p each, its highest closing level since November 2018.

Such a surge, over last week's private equity approach of 230p, indicates that the City is anticipating a higher bid for the UK's fourth-largest supermarket chain.

4.02pm BST

Back in the City, shares in Morrisons are still very sharply higher - now up over 33% at 239p, having soared once the market opened.

That's further above the 230p per share offer which was rebuffed last week, implying that the City does expect a higher bid.

The UK's largest asset manager has blasted the bid for Wm Morrison by Clayton, Dubilier & Rice, warning the private equity house would not be adding any genuine value" to the supermarket with its purchase.

Andrew Koch, senior fund manager, active equities at Legal and General Investment Management, a top 10 shareholder in Morrisons, suggested the bid from the buyout firm was too low. CD&R approached Morrisons with a 230p-a-share offer last week, giving the UK's fourth-largest supermarket group an enterprise value of 8.7bn.

Legal and General slams Morrisons bid as shares surge https://t.co/whQFRrcfFS

3.55pm BST

Dallas Federal Reserve president Robert Kaplan has been explaining that the Fed predicted US interest rates would rise sooner, because the economic outlook has brightened so much.

Reuters explains:

The tilt by Fed policymakers to a faster expected start to interest rate increases was a reaction to an economic outlook that took a sharp turn between December and June, Dallas Federal Reserve president Robert Kaplan said on Monday.

As of December the path of the coronavirus pandemic remained uncertain, but when we got to March it was clearer that we were going to get the pandemic under control...By the time we get to June...you've really got a big upgrade" that made the core of officials expect rate increases in 2023 instead of 2024, said Kaplan.

Fed's Kaplan (2023 voter)
- Still expects 6.5% GDP growth
- Expects unemployment rate to drop to 4-4.5%
- Still have not returned to as much as in person work as we may have by the fall
- In favour of taking the foot off the accelerator sooner rather than later

Fed's Kaplan
- Moderating asset purchases sooner rather than later may increase Fed's odds of achieving inflation goal

3.34pm BST

#DOW 33650.09 +1.08%#SPX 4196.76 +0.73%#NDX 14064.0 +0.10%#RTY 2262.12 +1.09%#VIX 19.21 -1.49

3.12pm BST

In other retail news...Selfridges has launched garden centres at its stores in London, Manchester and Birmingham stores, capitalising on the gardening boom that accelerated during the pandemic.

2.49pm BST

Stocks have opened higher on Wall Street, as traders look to put Friday's slide behind them.

The Dow and the S&P 500 are both higher, with tech stocks are dipping, pulling the Nasdaq lower as investors return to companies who will benefit from the reopening.

Dow jumps more than 200 points, rebounds from its worst week since October https://t.co/siZ17cgHyE

Stocks opened higher Monday, attempting to bounce after a hawkish shift by Fed policy makers triggered a selloff last week that contributed to a 3.5% weekly decline by the Dow Jones Industrial Average, its largest since October.https://t.co/jMC3qUseHx https://t.co/NFZAfdKnxU pic.twitter.com/MlAVRv95vR

2.28pm BST

US economic growth picked up last month after a dip in April, according to the latest healthcheck.

The Chicago Fed National Activity Index rose to +0.29 in May, from -0.09 the previous month. It combines 85 different indicators to get an overall picture of economic activity and related inflationary pressures,

Chicago Fed Nat'l Activity Index for May confirms a pickup in US economic growth, "led by improvements in production-related indicators": https://t.co/FsCDtQckbs pic.twitter.com/r1EZiiuehV

NEW DATA: Chicago Fed National Activity Index points to a pickup in economic growth in May as the #CFNAI increased to +0.29 from -0.09 in April. https://t.co/nJqDX5uI4u pic.twitter.com/zyDP7CrC9T

2.17pm BST

Losses at the British fintech firm Revolut nearly doubled last year, despite cashing in on the year-end cryptocurrency boom.

The company - founded by the former Lehman Brothers trader Nik Storonsky and chaired by the ex-Standard Life Aberdeen boss Martin Gilbert - said it made 39m on its cryptocurrency investments last year, while growing demand for its crypto trading services helped pushed revenues up 34% to 222m in the 12 months to 31 December.

1.50pm BST

Bitcoin tumbling this morning. So are shares of crypto related stocks. $COIN $MSTR $MARA $RIOT all down #premarket.

1.50pm BST

#bitcoin, #ether and other cryptocurrencies are in the red this morning following a growing crackdown on #crypto in China@onlyyoontv reports: pic.twitter.com/LFuIGGsHB3

1.29pm BST

In the crypto world, bitcoin has taken a tumble today after China intensified its crackdown.

Bitcoin has fallen around 8% today to around $32,300, a near two-week low, following reports that China's central bank had demanded a tougher crackdown on the use of crypto currencies.

China's central bank said on Monday it had summoned some banks and payment institutions recently, urging them to crack down harder on cryptocurrency trading.

The People's Bank of China's meeting with institutions including Agricultural Bank of China (AgBank) and Alipay came after China's State Council, or cabinet, last month vowed to crack down on bitcoin trading and mining.

The Sichuan Provincial Development and Reform Commission, and the Sichuan Energy Bureau issued a joint notice, dated Friday and seen by Reuters, demanding the closure of 26 suspected cryptocurrency mining projects by Sunday.

Sichuan is China's second-biggest bitcoin mining province, according to data compiled by the University of Cambridge. Some miners move their activities there in the rainy summer to take advantage of its rich hydropower resources.

1.06pm BST

Here's our news story on Morrisons' share price surge this morning:

Morrisons shares leap more than 30% as it rejects 5.5bn offer https://t.co/cPlnLaiXuA

12.49pm BST

UK shopper numbers fell by 3% last week, as the widespread, and sometimes heavy, rain showers dampened enthusiasm among consumers.

The news announced last Monday that regulations will not be eased for another month seems to have acted as a dampener on consumer activity last week, with footfall across UK retail destinations lower than the week before for the second consecutive week despite hot and sunny weather in the first half of the week.

For most of the UK rain dominated the last few days from Thursday onwards, which inevitably impacted high streets most heavily of the three destination types; here the drop in footfall between Thursday and Saturday was more than twice that between the previous days."

12.04pm BST

The pound is recovering from last week's slide against the US dollar.

After touching a two-month low below $1.38 in overnight trading, sterling is now up around three-quarter of a cent at $1.388.

In the currency markets, the US dollar's near 2% surge post the Fed meeting lost some steam on Monday, providing some respite for its heavily battered peers. The dollar index edged slightly below Friday's two-month highs as the euro and pound gained about 0.2%.

The safe-haven yen and Swiss franc were mixed, suggesting the rebound in risk appetite was weak contrary to the positive signals from US equity futures.

11.58am BST

Chris Beauchamp, chief market analyst at IG, fears the stock markets may struggle to rally much today, after the jolt from the Federal Reserve last week (when officials predicted US interest rates would rise in 2023, earlier than expected):

Rising instances of the Delta variant in Europe will likely weigh on European markets, but the overall view continues to be that the second half of the year will see a further return to normality, boosting earnings in the medium term.

Unsurprisingly the Morrisons news is the major headline in UK markets, and both Sainsbury's and Ocado have rallied in sympathy with the northern grocer.

11.43am BST

It's been a choppy start to trading in the financial markets.

The FTSE 100 hit a one-month low early in the session, despite the lift from Tesco and Sainsbury, dropping through the 7,000 point mark to as low as 6949 points.

What a turnaround:#FTSE 7042.64 +0.36%#DAX 15539.27 +0.59%#CAC 6595.45 +0.40%#AEX 723.67 +0.56%#MIB 25317.77 +0.39%#IBEX 9040.2 +0.11%#OMX 2263.234 +0.68%#STOXX 4107.47 +0.59% pic.twitter.com/Qg7iuPhIXl

11.02am BST

Capita's shares (+7%) rallied this morning after it told the City it is on course to grow its revenues this year, for the first time in six years, and announced the sale of Axelos, its joint venture with the UK Cabinet Office.

Capita said trading had improved this year, in line with expectations, including some new contract wins:

We have won a number of significant contracts this year, including the Royal Navy Training contract through our Government Services and People Solutions divisions (Total Contract Value 925m), the extension of a European telecoms client (TCV 528m) and an extension for Tesco Mobile (TCV 58m), both in Customer Management.

London's Capita sells government joint venture Axelos for 380m https://t.co/Nf2UyIE3vu pic.twitter.com/lyRLyuzwbv

We are very pleased to have agreed, alongside Cabinet Office, the sale of our joint venture AXELOS to PeopleCert after a competitive auction process.

Capita and Cabinet Office have partnered together to grow the business over the last eight years, creating significant value for us and the taxpayer.

9.47am BST

AJ Bell investment director Russ Mould has written an interesting note on the takeover interest in Morrisons.

He points out that the UK supermarket sector had been seen as a slow growth, highly competitive market", so not a natural source of takeover activity.

Mergers were more plausible, such as we saw with Sainsbury's trying to marry Asda to gain scale and find a new source of earnings growth. But non-trade buyers swooping for deals didn't seem like an obvious play until we saw the Issa brothers snap up Asda after the Sainsbury's deal collapsed.

Strategically Morrisons has cemented an important relationship as a key supplier and partner to Amazon, and to McColls convenience stores. It has also established a successful online delivery service.

Morrisons' balance sheet has plenty of asset backing and the valuation was relatively depressed before news of private equity interest.

The business had done a lot of hard work and put itself in a stronger position to continue fighting competitive threats, but the market hadn't recognised this shift and the shares had languished due to concerns about the difficult environment in which Morrisons operates.

This is not to say Morrisons is a slam-dunk. But you can see the value case for the shares and that must be the key attraction for CD&R. The issue now is how the big shareholders respond and whether they - and the Morrisons board - feel they can squeeze out a higher bid or feel sufficiently confident in Morrisons' strategy and long-term competitive position to spurn the offer altogether.

The shares traded at 235p early on Monday which is higher than that 230p proposal from CD&R. The market therefore seems confident that the suitor will have to raise its offer price or someone else might step into the game and we'll see a bidding war.

9.34am BST

Simon French of Panmure Gordon points out that loose financial conditions, low valuations, and the UK's permissive' takeover regime are driving bids for UK companies.

WM Morrisons bid (@ 30% premium) takes value of bids for publicly listed companies past 50bn (44 deals) in 2021. As discussed with @dominicoc earlier, this is part of trend driven by loose financial conditions, low valuations of UK public co's & permissive UK takeover regime

9.26am BST

9.12am BST

Morrisons shares are holding their gains, and are trading over 31% higher at around 234.5p - above CD&R's 230p per share approach (which was rebuffed).

It's firmly the top riser on the FTSE 250 leaderboard of medium-sized companies listed in London (Morrisons was relegated from the blue-chip FTSE 100 earlier this year), ahead of outsourcing firm Capita (+5.5%) and high street clothing and food chain Marks & Spencer (+3%)

8.43am BST

Morrisons share price has jumped 53.85p, 30.65%, to 233.2p so far this morning - through the 230p proposal by private equity bidder CD&R meaning investors are confident there's going to be a higher bid coming from somewhere. Analysts reckon M board will have to engage around 245p

8.16am BST

Morrisons share price rockets on rejected 230p-a-share private equity bid - this will catapult the whole "private equity eating the FTSE" story into a new league https://t.co/juAMAB5qyw

8.15am BST

Shares in Wm Morrisons have surged by around 30% at the start of trading in London.

They've jumped to around 233p, up from 178.45p on Friday night.

8.08am BST

The stock market is open...and shares in Sainsbury's, the UK's second-largest supermarket chain, have jumped by over 4.5% to the top of the FTSE 100 leaderboard.

Market leader Tesco are close behind, up 2.5%, on speculation that other supermarket chains are now in play' for private equity firms...... as we wait for Morrisons to trade....

7.57am BST

The Times says the board of Morrisons will seek assurances from any buyer on the future of its workforce, manufacturing and pensions, as the Bradford-based supermarket group prepares for rival bid approaches.

Ashley Armstrong writes:

Morrisons' board is understood to recognise that the retailer is now in play". However, as well as an attractive price it would want commitments and assurances from any bidder.

Morrisons board is understood to want job pledges in any takeover deal as private equity firm CD&R isn't taking no for an answer just yet.. via @TimesBusiness https://t.co/A3OTqHA9d7

7.43am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

A shock takeover approach for Wm Morrison from private equity firm Clayton Dubilier & Rice has raised fears over possible job losses, and could prompt a bidding war for the UK's fourth largest grocer.

I suspect a [Morrisons] deal can be agreed at 250p-260p and after that the focus will increase on a potential breakup of Sainsbury and even Tesco, so it should be a lively day on the stock market.

I certainly wouldn't want to be a hedge fund short of any of the big three.

The whole industry is in play now. It's not unrealistic to say that there could not be a single quoted British supermarket left in the foreseeable future."

Britain's supermarkets stepped up to serve communities during the pandemic. Our supermarkets that play a role at the heart of our communities need owners that put the long-term interests of the business and its employees first.

When Debenhams went bust we saw private equity firms walk away while employees lost their jobs and staff who have paid into the pension scheme were left out of pocket. Too often dodgy private equity firms load the companies with debt and leave while pocketing the dividends. This has to end."

European Opening Calls:#FTSE 6953 -0.92%#DAX 15294 -1.00%#CAC 6518 -0.78%#AEX 712 -1.03%#MIB 24907 -1.23%#IBEX 8914 -1.29%#OMX 2226 -0.98%#STOXX 4040 -1.06%#IGOpeningCall

Federal Reserve official James Bullard became the proverbial bull in a China shop on Friday when he said that the Fed might need to raise rates in late 2022 instead of 2023. That sparked a run for the exit door for equity markets and commodities while the US Dollar powered higher.

The US yield curve continued to flatten as long-dated bond yields slumped, notably in the 20-year tenor.

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