Qatari firm makes £12bn Sainsbury’s approach

Sainsbury’s, the third-largest grocer in the United Kingdom, has became the target of a takeover bid for the second time this year with Delta Two’s reported approach of 610 pence a share, which values the grocer at around £12 billion ($26.6 billion, €17.9 billion).

Delta Two, which now owns 25 percent of the company after buying shares in recent weeks, is the investment vehicle of the Qatari government-backed investment fund Three Delta. Sainsbury’s has confirmed that it has been approached by the firm.

The firm bought an additional 7.1 percent of the supermarket in June at 595p per share for £732 million. Shortly afterwards property tycoon Robert Tchenguiz, who has close ties to Three Delta and its head Paul Taylor, increased his holding from five percent to 11 percent. This fueled speculation that Tchenguiz was working with Taylor, who was formerly the chief executive of Tchenguiz-owned Rotch Property Group. However Tchenguiz has denied any collaboration with Three Delta.

The supermarket rejected a £5.82 per share bid led by global private equity group CVC Capital Partners in April. CVC was accompanied on the bid by US buyout firms Blackstone, KKR and TPG. The consortium fell apart when KKR
decided to pull out on 5 April with Blackstone and TPG following suit five days later. CVC abandoned its bid the day afterwards on 11 April.

Sainsbury’s shares were up one percent, at 591.5 pence, as of 9:30am GMT.

The founding Sainsbury family, who control about 18 percent of the shares, strongly resisted the buyout firms’ approach. Some of the family expressed an unwillingness to sell at any price, while Lord Sainsbury of Turville, who owns a 7.75 percent stake, refused to consider any bid below £6.00 per share.

The fact that Delta Two plans to leverage some £8 billion to fund the deal will probably not do much to quel the fears of the Sainsbury’s family, which didn’t react positively to the private equity structure of the previous bid.

Sainsbury’s £8.6 billion property estate is believed to be the target of the shareholders. Tchenguiz suggested in April after he bought his initial five percent stake that the company should separate its property assets from the main business. Such an action would allow the company to sell off its property holdings and return the cash to shareholders. However the company has insisted its property assets are too important to let go.