Exclusive: Some employees report feeling pressed by private equity owners to contribute to an ailing business
Staff who agreed to invest in shares in Morrisons are said to have been paid a special bonus.
Photograph: Chris Radburn/PA
Sarah Butler
Sarah Butler
THE GUARDIAN
@whatbutlersaw
@whatbutlersaw
Fri 23 Sep 2022
Morrisons’ private equity owners have asked hundreds of staff – from store managers upwards – to invest thousands of pounds of their own money in the business.
More than 800 people have been asked to invest in the ailing supermarket in the past few months, with one well-placed source saying middle management level departmental heads had been asked for £10,000 while the directors of departments had been asked for £25,000 each. It is understood the minimum investmentrequired to participate was £2,000.
The source said that, while contributions were voluntary, some staff were annoyed about feeling pressed to make a cash contribution to an ailing business at a time when the cost of living was soaring.
“People are used to being paid bonuses rather than asked to invest,” the source said.
However, it is understood that those who agreed to invest in shares in Morrisons were paid a special bonus, equivalent to 60% of the amount they were asked to invest before tax, with quite a number understood to have invested more.
A spokesperson said: “The opportunity to invest in the future of Morrisons was incredibly popular throughout the business with over 800 colleagues, or more than 90% of those eligible, choosing to invest.”
One expert said it was common to ask staff to invest as part of private equity deals, with the stakes seen as an incentive to help the business grow.
While it is less usual to ask rank-and-file workers to participate, he said the wider-than-usual scope of the Morrisons scheme could be seen as a good thing, allowing more people to benefit from a potential return on their investment.
The grocer, which was bought out by the US private equity firm Clayton Dubilier & Rice (CD&R) in a deal worth about £7bn last year, last week lost its position as the UK’s fourth largest supermarket chain to German discounter Aldi.
Morrisons’ market share has been drifting as it is opening very little new space and surveys suggest its prices have become more expensive in comparison to key competitors.
Sales fell by 4.1% in the three months to 4 September, a time when all other major supermarkets except Waitrose increased sales.
One industry insider said: “The numbers look grim. [The product] doesn’t look exciting and they have missed quite a lot of opportunities.” The source said suppliers were becoming disillusioned as volume of goods sold by the retailer fell back.
Trevor Strain, the righthand man of the chief executive, David Potts, is understood to have told the business he plans to leave as he wants to seek a top job elsewhere. One source said Strain had been unwilling to commit to a further five years at the business, to see out CD&R’s investment plan, having joined Morrisons in 2009.
In April, Morrisons warned its profits were likely to take a significant hit this year as the cost of living crisis and disruption due to the war in Ukraine weigh on the grocery market.
The supermarket chain said “developments in the geopolitical environment” and “ongoing and increasing inflationary pressure” since the beginning of February were hitting consumer sentiment and spending.
The retailer also recently bought the McColl’s network of more than 1,000 convenience store outlets out of administration as it moved to protect a wholesale supply agreement to the chain. McColl’s had been suffering from financial pressures for some time before its collapse.
Morrisons’ private equity owners have asked hundreds of staff – from store managers upwards – to invest thousands of pounds of their own money in the business.
More than 800 people have been asked to invest in the ailing supermarket in the past few months, with one well-placed source saying middle management level departmental heads had been asked for £10,000 while the directors of departments had been asked for £25,000 each. It is understood the minimum investmentrequired to participate was £2,000.
The source said that, while contributions were voluntary, some staff were annoyed about feeling pressed to make a cash contribution to an ailing business at a time when the cost of living was soaring.
“People are used to being paid bonuses rather than asked to invest,” the source said.
However, it is understood that those who agreed to invest in shares in Morrisons were paid a special bonus, equivalent to 60% of the amount they were asked to invest before tax, with quite a number understood to have invested more.
A spokesperson said: “The opportunity to invest in the future of Morrisons was incredibly popular throughout the business with over 800 colleagues, or more than 90% of those eligible, choosing to invest.”
One expert said it was common to ask staff to invest as part of private equity deals, with the stakes seen as an incentive to help the business grow.
While it is less usual to ask rank-and-file workers to participate, he said the wider-than-usual scope of the Morrisons scheme could be seen as a good thing, allowing more people to benefit from a potential return on their investment.
The grocer, which was bought out by the US private equity firm Clayton Dubilier & Rice (CD&R) in a deal worth about £7bn last year, last week lost its position as the UK’s fourth largest supermarket chain to German discounter Aldi.
Morrisons’ market share has been drifting as it is opening very little new space and surveys suggest its prices have become more expensive in comparison to key competitors.
Sales fell by 4.1% in the three months to 4 September, a time when all other major supermarkets except Waitrose increased sales.
One industry insider said: “The numbers look grim. [The product] doesn’t look exciting and they have missed quite a lot of opportunities.” The source said suppliers were becoming disillusioned as volume of goods sold by the retailer fell back.
Trevor Strain, the righthand man of the chief executive, David Potts, is understood to have told the business he plans to leave as he wants to seek a top job elsewhere. One source said Strain had been unwilling to commit to a further five years at the business, to see out CD&R’s investment plan, having joined Morrisons in 2009.
In April, Morrisons warned its profits were likely to take a significant hit this year as the cost of living crisis and disruption due to the war in Ukraine weigh on the grocery market.
The supermarket chain said “developments in the geopolitical environment” and “ongoing and increasing inflationary pressure” since the beginning of February were hitting consumer sentiment and spending.
The retailer also recently bought the McColl’s network of more than 1,000 convenience store outlets out of administration as it moved to protect a wholesale supply agreement to the chain. McColl’s had been suffering from financial pressures for some time before its collapse.
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