J. Sainsbury, the UK supermarket chain that has been the subject of private equity bidding over the past year, has estimated that the real estate it owns is worth £8 billion ($15.6 billion) to £8.6 billion pounds.
In a conference call with reporters following the release of the company’s annual results, chief financial officer Darren Shapland said that though it has not completed an official valuation, the company estimates that the value of its real estate is somewhere between those two numbers.
In March the chain announced it would invest £273 million in buying back ownership of 38 of its stores from British Land, Europe’s largest real estate company. The retailer had been leasing the stores for the past 20 years. That buyback was the opposite of the conventional logic for the chain last year, when private equity firms were involved in a bidding war to acquire the company. CVC Capital Partners and Qatar-backed Three Delta both made unsuccessful bids for the chain, as property tycoon Robert Tchenguiz increased his stake in the company in anticipation of a deal. Tchenguiz, and many others in the industry, had urged the chain to sell off its property assets in order to increase liquidity. At the time many expected the private equity bidders to pursue this strategy.
It appears the company is undertaking a strategy to acquire more property in order to have more control over what it can do with its stores.
Three Delta called off its bid for Sainsbury in November after its backer, sovereign fund the Qatari Investment Authority, decided against funding a £500 million equity increase. The firm had initially looked to bid with £3.6 billion of equity at the pre-due diligence stage, while still paying £6.00 per share for the company. In April a CVC Capital Partners-led consortium also pulled out of talks with the supermarket. The consortium included US firms Blackstone, Kohlberg Kravis Roberts and TPG.