Wm Morrison Supermarkets PLC (LON:MRW) could benefit from privatisation as it would allow focus on long-term transformation rather than mid-term results, according to Credit Suisse.
Apollo Global Management confirmed on Monday it’s considering putting an offer forward, days after the grocer told shareholders to approve a £6.3bn offer from Fortress Investment.
READ: Morrisons takeover is about property not grocery, experts say
Two weeks ago, the FTSE 250 group turned down a £5.5bn takeover approach from Clayton, Dubilier & Rice, which may as well come back with a new proposal.
Analysts raised the target price to 254p from 216p to reflect Fortress’s 252p per share bid and the 2p special dividend proposal.
However, they downgraded the stock to ‘neutral’ from ‘outperform’ given limited potential upside from current levels and uncertainties related to the finalisation of the deal.
The Swiss bank forecast another three valuation scenarios, with a base-case of 220p and a ‘blue sky’ of 290p.
In the Sale & Leaseback scenario, Morrisons is worth 280p per share based on a £5.8bn book value of real estate assets as a proxy for market value with a 5.2% yield.
“There could be multiple potential bidders (CD&R, Fortress and Apollo, which highlighted potential interest in a statement), which could increase the price if shareholders do not vote in favour of the Fortress transaction. The key risk to our target price is absence of any transaction, which, in our view, is unlikely,” the analysts said.
Shares were flat at 266.9p on Tuesday morning, having climbed 51% in the past month.