Sainsbury’s shares slide as consortium disintegrates

Shares in Sainsbury’s, a UK grocery chain at the center of a controversial £10bn private equity bid, slid this morning as two more of the buyout firms involved reportedly pulled out of the deal. The news followed continuing opposition from pension fund trustees and minority shareholders.

Sainsbury’s share price dipped sharply this morning, as the reported withdrawal of two more firms from the buyout consortium circling the UK retailer made the prospect of a successful deal look even more remote.

The retailer’s share price fell nearly 5 percent in morning trading, after media reports that The Blackstone Group and TPG have both dropped out of the bidding group. Following the withdrawal of Kohlberg Kravis Roberts last week, this would leave CVC Capital Partners as the only one of the original consortium still in the running for Sainsbury’s, which is valued at about £10 billion (€14.7 billion; $19.7 billion).

The CVC-led group finally made a 560 pence per share indicative offer for Sainsbury’s over the weekend, just days ahead of the “put up or shut up” deadline of April 13 imposed by the UK Takeover Panel. This was rejected out-of-hand, causing the consortium to increase its bid to 582 pence per share.

Although the revised bid is thought to have met with the board’s approval, it was not enough to enlist the support of either the pension fund trustees or the minority shareholders.

Blackstone and TPG are not affected by the competition concerns facing KKR, given the latter’s ongoing bid for UK health and beauty group Alliance Boots. However, the continuing opposition from the Sainsbury family, who are said to be unwilling to consider any bid below 600 pence per share, and the trustees, who are reportedly looking for a £1 billion payment to plug a pension fund deficit, is thought to have caused the two firms to withdraw from the bidding group.

At mid-day, shares in Sainsbury’s were trading at 535 pence, down 26 pence or 4.6 percent.