Brandes gives approval to Sir Ken

13 April 2012

US investment fund Brandes has signalled its faith in supermarket supremo Sir Ken Morrison, who is having a tough time with his newly-purchased Safeway chain.

The secretive American fund manager believes the deal will come right, and has built a 4.2% stake in Morrison supermarkets.

San Diego-based Brandes has a canny knack of buying shares in oversold firms. The investment firm owns large stakes in a raft of UK companies.

Its top retail specialist, Amelia Morris, accumulated stakes in Safeway and Marks & Spencer before they became bid targets.

Brandes tends to be a long-term holder of shares, though as mother-of-four Morris proved with M&S, it is not afraid to put pressure on boards to sharpen up their act.

The firm's interest in Morrison supermarkets first emerged last month. It said last night that Brandes had increased its stake to 4.2%, worth £200m.

Bradford-based Morrison, down 1 1/2p to 179 1/2p, is trading close to 18-month lows, after a shock profit warning last month.

Sales are still sliding at the newly-acquired Safeway stores, so Sir Ken is slashing prices to try to lure customers back.

Morrison last week completed the rebranding of a Milton Keynes Safeway superstore, and it is understood that initial sales are ahead of targets.

The aim is to convert three Safeway stores to the Morrisons brand every week. Some fear, however, that Sir Ken has bitten off more than he can chew.

Before buying Safeway, Morrison ran just 127 stores, now it has more than 500. Brandes clearly believes the risks are already reflected in the share price.

Investment bank UBS is a buyer of Morrison, with a 275p target price.

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