Shareholders in Wm Morrison Supermarkets (LSE: MRW) have had a sparkling 2021 so far. And, as far as the Morrisons share price is concerned, this coming weekend could be the icing on this already ample cake. The shares have almost doubled since last October. What’s more, their final push should come on Saturday, when the London stock market will be closed.
The Morrisons share price’s ups and downs
On 24 August 2018, the Morrisons share price was riding high, closing at 266.8p. But then the stock set off on a multi-year decline, made worse by the Covid-19 crisis. Last Bonfire Night (5 November), MRW had tumbled to a closing low of 161.75p. Although the stock bounced back with the wider market after ‘Vaccine Monday’ (7 November 2020), it failed to hold onto these gains.
In early May, I spotted the weakening Morrisons share price, so I cast my value-seeking eye over the stock. On 11 May, Morrisons released its latest trading figures, showing plenty of progress within the group. At that time, cash flow was strong and debt was reducing. With the stock trading at 183.95p, I said I would buy MRW, as “the business is going in the right direction”. And what a remarkably timely call that proved to be.
On the weekend of 19–20 June, news broke of the first in a series of takeover offers for the UK’s fourth-largest supermarket. As bid after higher bid rolled in (230p, 254p, 270p, and 285p), the Morrisons share price skyrocketed. On Thursday, it closed at 295.03p. That’s a gain of over 111p a share since my May review — a surge of more than three-fifths (+60.4%). But MRW is finally entering its endgame…
[fool_stock_chart ticker=LSE:MRW]Auction time (‘The Price is Right’)
On Saturday, 2 October, the Takeover Panel will auction off the Bradford-based grocer to the highest bidder. This one-day auction will consist of up to five rounds of bidding between two competing consortiums. The warring groups are Fortress Investment and private-equity group Clayton, Dubilier & Rice. Obviously, as in most auctions, investors expect the Morrisons share price to rise after each round. But if neither bidder makes an increased cash offer in round one, then CD&R’s existing bid of 285p a share wins. This would value Morrisons and its debt at £9.7bn.
Having witnessed similar takeover tussles in my 35 years as an investor, I suspect that there is more to come for Morrisons’ shareholders. I hate to make very short-term predictions of share prices, but my gut feeling is that this ding-dong battle is not quite done yet. I imagine that a bid of £10bn+ might be the outcome of Saturday’s showdown, which will end by 5pm. Indeed, one leading analyst reckons that a knockout bid of 315p per share could seal the deal.
In summary, if the auction fails, then the minimum bid for Morrisons shares would be 285p. That’s about 10p lower than the current market price. But higher bids could emerge, lifting the Morrisons share price on Monday. Hence, I’m keenly awaiting the outcome of this corporate game of The Price is Right on Saturday afternoon!