The asset stripping of Asda and Morrisons reduces the entire finance industry to hot air

Private equity has raised £6.5bn from asset stripping Asda and Morrisons’ properties after purchasing the supermarkets, according to the Financial Times. The properties that Asda and Morrisons own are worth more sold individually than the private valuation of the whole companies under their brands. But when compared to publicly owned supermarkets the type of finance private equity operates under is reduced to hot air.

Private equity: rigged, as Asda and Morrisons show

People are always going to need food, hence they need food distribution centres (supermarkets). So when TDR Capital bought Asda in 2021 and when Clayton Dubilier & Rice bought Morrisons in 2022 it was a low risk investment, to say the least.

These private finance funds used a lot of debt to buy the companies, minimising the amount of capital they had to provide and enabling them to avoid tax. This increases profit when compared to initial investment because the investment funds aren’t using much of their own money, as well as the tax benefits.

The hot air comes into sharp focus when considering that Clayton Dubilier & Rice sold 337 of Morrisons’ petrol stations for £2.5bn to the Motor Fuel Group, which, by chance, it also owns.

Bubble

It’s clear overall that finance is a bubble when compared to a society that provides essentials publicly based on organised demand. Supermarkets, like Asda and Morrisons (now owned by private equity), are profit extracting middle men between people and agriculture. There’s no need for these organisations to be owned privately when they are necessary for the very basics of being human (eating food). On top of private ownership, Asda and Morrisons are now being asset stripped by private equity, which will increase long term costs because the property being sold is, in most cases, rented back to the supermarket. Those costs may well increase grocery prices further.

Instead, supermarkets should be non profit and high tech through incorporating self-service systems like the ‘Dash Cart’. There’s no need for people to slave away in supermarkets if the process can be automated.

Polling suggests people are tired of the hot air of capitalism. 82% of UK people support a different economy organised around need with universal public services.

Featured image via the Canary