Morrisons said to be exploring £1bn property deal

(Sharecast News) - Supermarket chain Morrisons is reportedly exploring a �1bn property deal as it looks to recapture the ground it has lost to rivals including Sainsbury's and Aldi.

According to Sky News, Bradford-based Morrisons has engaged real estate advisory firm CBRE to evaluate options for raising finance secured against part of its large freehold store portfolio.

Sources told Sky the process was at an early stage, but that it was unlikely to involve a conventional sale-and-leaseback transaction of the kind favoured by major grocers in recent decades. One option expected to be considered is a medium- or long-term borrowing deal secured against a number of Morrisons' supermarkets.

It was understood that any agreement could raise as much as �1bn, although neither the structure nor size have yet been determined.

Morrisons, which trades from approximately 500 supermarkets in the UK and employs about 95,000 people, was taken private from the stock market by US buyout firm Clayton Dubilier & Rice in 2021 in a deal worth close to �10bn including debt.

Its performance since then has been patchy, with Aldi overtaking it last year to become the UK's fourth-biggest grocer by sales.

Morrisons owns the freeholds to roughly 80% of its store estate, among the highest levels in the sector. One source told Sky that releasing �1bn of value through a sale-and-leaseback or leverage-based transaction would still leave the proportion of wholly owned stores at about 60%.

The company has been steadily paying down the debt it took on as part of CD&R's takeover, with only about �1bn of acquisition finance left to be repaid.

Morrisons has no short-term debt maturities, a source told Sky, meaning it is under no pressure to strike a property deal.