Morrisons Considers Major Property Transaction to Raise Up to £1bn
Supermarket giant Morrisons is actively exploring a substantial property deal that could unlock as much as £1bn in value from its extensive freehold store portfolio. The UK's fifth-largest grocery chain has reportedly enlisted the expertise of real estate advisory firm CBRE to assess various financial options, according to exclusive information obtained by Sky News.
Strategic Evaluation of Store Portfolio Assets
Morrisons, headquartered in Bradford, West Yorkshire, has initiated a comprehensive review of its property holdings to determine the most effective method for raising capital. While the process remains in its preliminary stages, industry sources indicate that the transaction is unlikely to follow the conventional sale-and-leaseback model that has been popular among major supermarket chains in recent decades.
Instead, the company is considering alternative structures, including medium to long-term borrowing arrangements secured against a selection of its supermarket properties. The precise framework and ultimate value of any potential agreement have yet to be finalised, but the ambitious target of approximately £1bn demonstrates the scale of Morrisons' strategic ambitions.
Background of Private Ownership and Market Position
Morrisons operates approximately 500 supermarkets across the United Kingdom and employs around 95,000 people. The company was taken private in 2021 through a landmark acquisition by US-based private equity firm Clayton Dubilier & Rice, in a transaction valued at nearly £10bn including assumed debt. Since this transition away from public markets, Morrisons has experienced fluctuating performance, with discount rival Aldi surpassing it last year to claim the position of the UK's fourth-largest grocer by sales volume.
In response to these competitive challenges, Morrisons appointed Rami Baitieh, a former executive of international retailer Carrefour, as its new chief executive in 2023. Baitieh has been tasked with implementing strategies to reverse the company's declining market position and restore its competitive edge within the highly contested UK grocery sector.
Unique Property Ownership Structure
One of Morrisons' distinctive characteristics within the supermarket industry is its exceptionally high level of freehold ownership. The company possesses the freeholds to approximately 80% of its store estate, representing one of the highest proportions in the entire retail sector. This substantial property portfolio provides significant potential for unlocking capital through strategic financial engineering.
Industry analysts suggest that even if Morrisons successfully releases £1bn in value through a property transaction, the company would still retain ownership of around 60% of its stores. This would maintain a considerable level of control over its physical retail footprint while generating substantial capital for reinvestment or debt reduction.
Recent Financial Developments and Debt Management
Morrisons has been systematically reducing the debt burden assumed during its acquisition by Clayton Dubilier & Rice, with only about £1bn of acquisition finance remaining to be repaid. Importantly, the company currently faces no immediate debt maturity pressures, providing it with flexibility in timing any property transaction to secure optimal terms.
During the competitive bidding process for Morrisons, Clayton Dubilier & Rice committed to avoiding significant disposals of store freeholds for a specified period following the acquisition. Since then, the company's property activities have primarily involved the sale of non-store assets, including a notable 2024 partnership with investment firm Song Capital. This arrangement involved a £370m transaction granting Song Capital the right to receive income from 75 Morrisons supermarkets over a 45-year period.
Broader Industry Context and Competitive Landscape
Morrisons represents one of two major UK supermarket chains now under private equity ownership, alongside Asda, which is controlled by TDR Capital with residual involvement from former owner Walmart. This ownership structure distinguishes both companies from publicly listed competitors such as Tesco and Sainsbury's, potentially influencing their strategic approaches to capital management and property utilisation.
Recent trading results from Morrisons indicate some positive momentum, with the company reporting "strong" Christmas performance and twelve consecutive quarters of like-for-like sales growth. Chief executive Rami Baitieh emphasised the company's resilience in challenging economic conditions, noting maintained EBITDA and market share despite significant external pressures on consumer spending.
Morrisons has declined to comment publicly on the prospective property deal, maintaining its position that discussions remain confidential and preliminary. The outcome of CBRE's evaluation will likely shape the company's strategic direction as it seeks to strengthen its financial position while competing effectively in the rapidly evolving UK grocery market.
