Status quo to persist at Morrison despite buyout rumours, says Shore Capital

12th Feb 2014 09:07

Shore Capital has retained its 'hold' recommendation for shares of WM Morrison despite reports that the firm's founders are considering taking the supermarket group private.The Morrison family, who are thought to hold around 9-10% of the UK grocer, have spoken to a number of private-equity firms to gauge their interest, according to Bloomberg."Not surprisingly, there is no confirmation or otherwise of such potential activity at this stage. However, given Morrison's trading weakness and relatively low valuation, such headlines and potential initiatives are to be expected to some degree at this time," said Shore Capital analysts Clive Black and Darren Shirley.They said that this interest is likely to support Morrison's share price, but warned that its freehold asset base is a material source of downside support too."We now watch matters with interest, albeit our central expectation is that the status quo will persist for now. If recent trading momentum is sustained for any reasonable period of time, then [...] material downgrades can be expected," they said.The analysts also said that they "would harbour mild concerns if we were Ocado", given that any potential new owners could renegotiate or even tear up the 25-year contract between Morrison and the online grocery delivery firm. "We do not believe, and any new owners may not believe, that this is a feasible plan and dealing with it sooner rather than later may be the best course of action to a recovery story," they said.Morrison was trading 2.3% higher at 242.75p by 09:39 on Wednesday morning.BC