By Sarah Young and James Davey
LONDON, Oct 2 (Reuters) - An auction to decide who wins a
$10 billion, six-month battle for British supermarket chain
Morrisons begins on Saturday, with the result expected
to be announced later.
The one-day auction pits U.S. private equity group Clayton,
Dubilier and Rice (CD&R) against a consortium led by Softbank
owned Fortress Investment Group.
CD&R, whose 285 pence a share bid was recommended by
Morrisons' board in August, is advised by Terry Leahy, a former
CEO of Britain's biggest supermarket chain Tesco.
Morrisons, based in Bradford, northern England, began as an
egg and butter merchant in 1899. It listed its shares in 1967
and is Britain's fourth-largest grocer after market leader
Tesco, Sainsbury's and Asda.
The battle for Morrisons is the most high-profile among a
spate of bids for British companies this year, reflecting
private equity's appetite for cash-generating assets.
The Takeover Panel, which governs the process for M&A deals
in Britain, moved to an auction because neither bidder has
declared their offers final.
The contest will consist of a maximum of five rounds.
In the first, either bidder may increase their offer. If
neither does, CD&R's existing agreed offer wins.
In the event of a higher bid in round one, the other bidder
can raise their own offer in three subsequent rounds.
If there is still no winner, both offerors may make an
increased bid in a fifth and final round.
To prevent a draw any fifth round offer by Fortress must be
at an "even" number of pence, while CD&R must bid an "odd"
number of pence.
The panel will make a statement once the auction has
completed and although Morrisons then has until Tuesday to make
its recommendation, it could make a statement as early as
Saturday after its board meets.
Morrisons shares closed at 297 pence on Friday, indicating
investors expect a higher bid.
Both CD&R and Fortress have committed to retain Morrisons'
Bradford headquarters and its existing management team led by
CEO David Potts, execute its strategy, not sell its freehold
store estate and to maintain staff pay rates.
However, the commitments are not legally binding.
(Reporting by James Davey and Sarah Young; Editing by Alexander
Smith)