Private equity eyes Sainsbury’s

A trio of private equity firms could mount a €13bn bid for the supermarket chain partly using property to finance a deal.

CVC Capital Partners, Kohlberg Kravis Roberts and The Blackstone Group are considering a bid for Sainsbury’s, the UK supermarket group.

Shares in the company soared at 14.00 GMT by almost 15 percent to 512.25p, valuing the business at £8.7 billion (€13.1 billion;$17 billion). If a buyout were to go ahead at this price it would be Europe’s largest buyout.

The trio’s announcement follows circulation of a note by analyst Steve Davies at Numis Securities earlier in the week. He said: “We think it highly likely that property and/or financial investors are running the slide rule over Sainsbury’s.”
Davies estimates that Sainsbury’s value is not much higher than the value of its freehold properties, which he believes is as high as £8.5bn, assuming a yield of 4.5 percent.

The broker also notes that buyout firms could afford to bid a premium of up to 38 percent for Sainsbury by financing a buyout through the sale and lease back of stores to the parent company. It also mentioned the possibility of it being transformed into a REIT, introduced for the first time in the UK on 1 January.

As revealed by PERE’s sister website,, Goldman Sachs has been hired as adviser to the consortium. A source said the US bank would almost certainly look to co-invest in the event a bid goes ahead.

Analysts have said a price closer to 600p would be needed to encourage shareholders, who have seen their shares rise 50 percent in the last year on its turnaround plans, to sell.

However, the consortium downplayed the likelihood of a bid: In a statement, it said: “No decision has been made regarding the relative merits of an offer and as a consequence there can be no assurance that any offer for Sainsbury will be forthcoming.”

A source close to the team said CVC was the driving force behind the interest in the retailer, which declined to comment on the private equity firms’ statement.

Judith Portrait, the lawyer who controls most of the Sainsbury family trust, fuelled speculation, when she cut the stake from 16 percent to 13.89 per cent in a sale on Thursday. Lord Sainsbury of Turville is set to take control of his shares, held in a blind trust, later this month.