* CD&R wins auction with 287 pence per share bid
* Fortress loses after offering 286 pence per share
* Morrisons recommends shareholders accept CD&R's offer
* Shareholders to vote on deal on Oct. 19
(Adds Morrisons board recommendation, background)
By James Davey and Sarah Young
LONDON, Oct 2 (Reuters) - Clayton, Dubilier & Rice (CD&R)
has won the auction for Morrisons with a 7 billion pound
($9.5 billion) bid, paving the way for the U.S. private equity
firm to take control of Britain's fourth-biggest supermarket
group.
The board of Morrisons recommended CD&R's 287 pence per
share bid on Saturday, hours after its bid beat a consortium led
by Softbank owned Fortress Investment Group, which had
made an offer worth just a penny less per share at 286 pence.
CD&R's victory marks a triumphant return to the UK grocery
sector for Terry Leahy, the former chief executive of Britain's
biggest supermarket chain Tesco, who is a senior
adviser to CD&R.
The board recommended that shareholders vote in favour of
the 287 pence per share offer at a meeting slated for Oct. 19,
saying the private equity group had confirmed its previously
stated intentions towards Morrisons remained unchanged.
"Today's final offer from CD&R represents excellent value
for shareholders while at the same time protecting the
fundamental character of Morrisons for all stakeholders,"
Morrisons Chairman Andrew Higginson said in a statement.
If shareholders approve the offer, CD&R could complete its
takeover by the end of the month, making Morrisons the second UK
supermarket chain in a year to be acquired by private equity
after a buyout of no. 3 player Asda, completed in February.
EGGS AND BUTTER
CD&R has committed to retaining Morrisons' headquarters in
Bradford, northern England, and its existing management team,
led by CEO David Potts.
It also says it will execute the supermarket chain's
existing strategy, not sell its freehold store estate and
maintain staff pay rates.
These commitments are not legally binding, however.
Morrisons started out as an egg and butter merchant in 1899.
It listed its shares in 1967 and is Britain's fourth-largest
grocer after Tesco, Sainsbury's and Asda.
The takeover battle which has been running since May is the
most high-profile of a raft of bids for British companies this
year, reflecting private equity's appetite for cash-generating
UK assets.
CD&R's winning bid was only marginally above its 285 pence a
share offer which had already been recommended in August.
The final offer represents a 61% premium on Morrisons' share
price before takeover interest publicly emerged in mid-June.
Some analysts have said the victor may have to sell off assets,
such as factories, warehouses or stores, to make a decent
return.
CD&R could combine its 918 Motor Fuel Group (MFG) fuel
forecourts with the 339 owned by Morrisons, opening Morrisons
convenience stores on the sites, but that could face scrutiny
from the competition regulator.
Leahy was CEO of Tesco for 14 years to 2011 and will now be
reunited with Morrisons' Potts and Higginson, two of his closest
lieutenants at Tesco.
Potts, who joined Tesco as a 16-year-old shelf-stacker, will
make more than 10 million pounds from selling his Morrisons
shares to CD&R. Chief operating officer Trevor Strain will
pocket about 4 million pounds.
Fortress is left to lick its wounds and mull the cost of the
saga. Documents published in July showed that Fortress expected
to incur banking and advisory fees and expenses of 263.5 million
pounds.
In a statement Fortress said: "The UK remains a very
attractive investment environment from many perspectives, and we
will continue to explore opportunities to help strong management
teams grow their businesses and create long-term value."
Sainsbury's has in recent months been mooted as another
possible target for private equity and investment companies.
($1 = 0.7383 pounds)
(Reporting by Sarah Young and James Davey; Editing by Kate
Holton, Christina Fincher and Catherine Evans)
