Author: Zak Mir

There is nothing like the M&A situation which goes to the wire, especially at a time when M&A activity is a shadow of its former self. For plastics packaging group RPC we should know whether the Eagle will land over the next 24 hours, in the form of private equity group Apollo stumping up around £3bn for the UK group. Perhaps the thing to keep in mind here is that it has been a somewhat tortuous journey to tomorrow’s January 23 deadline, which is a deal goes through would make it fifth time lucky after all the extensions. The risk is that the 850p a share that some have been looking for may be a little rich for Apollo, and so some may be disappointed.

At least from a charting perspective while the stock holds the 702p level of the 50 day moving average the main destination here should be of the order of 800p. Of course, given the way that this is a fundamental bet, such detail may not be relevant, Indeed, what could be more noteworthy is the idea that after a difficult gestation period the risk of disappointment is that much greater.

It was officially – on the mainstream financial media – supposed to be the case that Morrison shares rose last week off the back of picking off stores from rivals, and the Amazon takeover reheat. While the stock paused yesterday, today we see it breaking above its 50 day moving average at 230.5p for the first time since September – a significant technical feat. Even better it has held the chart gap to the upside, a sign that those short of the stock were caught out, and remain in pain.

A decent end of day close today above the 50 day line should steer the shares back towards the mid 240p’s in the near term, with or without further speculation regarding the company. It is probably the case that if there was no background M&A noise, there would not have been the improvement / follow on move we are seeing this week.

It  has long been a  long running rumour in the market that Amazon is working on secret deal to buy Morrison. This idea has been helped along in the recent past with the shares of Morrison moving up since Christmas trading update from 210p.

They are now 225p, as shorts continue to cover their positions in the UK grocer. They have done so since the last trading update from Morrison as it beat market expectations, as well as it being the only grocer out of the top four which increased its market share.

Such a deal for Amazon to break into the UK market, effectively giving it boots on the ground in the UK would come in the run up to the scheduled Brexit date in March – something it is apparently keen to do. This is because it would then be in a prime position to take advantage of the volatility in the supermarket space which is likely to accompany the aftermath of this very controversial event.

At the same time, a takeover would be a great way of Morrison consolidating its position in the UK market – given how it has perennially been behind the main pack such as Tesco / Sainsbury / M&S historically.

The two companies have allegedly already had secret, “off the record talks” involving senior Morrison management, as Amazon wants to do this deal before any other consolidation in the UK supermarket space, as well as ahead of this country leaving the EU.

Talks are said to have been going on between Amazon and Morrison for over a year, but with Amazon cash rich, and able to buy MRW for pocket change, this is not the kind of deal that needs the traditional help of the City in terms of advisors and corporate finance.

City sources close to the deal say Amazon can press the button at any time, but it would take only around  a 350p a share offer to do the job, which would be a win for both Morrison and Amazon.

Clearly, if this goes to plan the likes of Tesco will be in a difficult position, one that compounds the issues such as price wars and overcapacity that currently troubles this sector in the bricks and mortar retail space.

For Amazon it would be as much of a coup – perhaps more in the UK in particular, than its bolt from the blue purchase of Whole Foods in the US in 2017.