Sainsbury’s shares rise on bid: US takeover firm Apollo would weigh more than £7bn bid for UK’s second-largest grocer
Shares in Sainsbury’s rocketed yesterday amid speculation it could be gobbled up by private equity.
New York-based takeover firm Apollo is said to be circling the supermarket, weighing a bid of more than £7 billion or 300 pence per share.
Apollo has been in the market for a UK supermarket for the past few years, losing to the Issa brothers and TDR Capital in the battle for Asda last year.
New York-based takeover firm Apollo is said to be circling Sainsbury’s and is considering an offer of more than £7 billion or 300 pence per share
Sainsbury’s is attractive to US bidders because of the supermarket’s large real estate portfolio in the Southeast.
The grocer built the real estate empire under John Sainsbury, who went shopping in the Home Counties in the 1970s and 1980s.
Clive Black, an analyst at Shore Capital, said, “The real estate portfolio is to die for in the Southeast. The deals under John Sainsbury were fantastic.’
Another private equity house known to be circling Sainsbury’s is CVC Capital.
In 2016, CVC, the Qatar Investment Authority and Canadian real estate group Brookfield made detailed plans to make an offer for the supermarket.
Plans were at an advanced stage and former ITV chairman Archie Norman was slated to become chairman if the takeover went through.
The new takeover talk sent Sainsbury’s shares up 15.4 percent or 45.3p to 340p, although some were quick to cast cold water on a potential deal.
Apollo remains interested in Morrisons, which CD&R and Fortress are fighting over.
Apollo wants to join forces with Fortress and form a consortium for the supermarket.
City sources said talks between Fortress and Apollo for Morrisons are ongoing and remain the number one priority for Apollo at this stage. “Apollo won’t be running until we find out what happened to Morrisons,” the source said.
A deal for Sainsbury’s can also be complicated for Apollo. Earlier this year, Vesa Equity Investment, the company co-founded by Czech entrepreneur Daniel Kretinsky, increased its stake in Sainsbury’s to 10 percent.
Other major shareholders in the company are Qatar Holdings, which has a 14 percent stake.
Convincing them that the company should go private wouldn’t be easy. Interest in Sainsbury’s comes amid an insane year for private equity, which has picked up undervalued UK assets since the start of the pandemic.
New data shows that US private equity funds have made 65 acquisitions in the UK in the past 12 months, an increase of 57 percent.
James West, partner at law firm Mayer Brown, said: “US groups have huge amounts of cash to bet and they prefer the UK when it comes to deals as it has a similar culture and regulation to the US.
“The UK’s central government and local government do not have a reputation among investors for interfering with the commercial decisions of companies that some countries in the EU have.”
Yet the government is increasingly showing its teeth, especially in the defense sector where Trade Minister Kwasi Kwarteng has launched an investigation into the acquisition of Ultra Electronics by private equity firm Advent.
Kwarteng has ordered the antitrust regulator to investigate the deal after warning that foreign investment “should not threaten national security.”
L&G in U-turn as it falls back on grocery
Morrisons got one step closer to falling into private equity hands after UK’s largest fund manager Clayton Dubilier & Rice (CD&R) gave the green light.
Legal & General has been a fierce critic of CD&R, saying in June that the private equity firm would “add no value” to the supermarket.
A month later, Legal & General also warned ‘it is important that Morrisons is not taken over for the wrong reasons’.
The company was concerned that CD&R would buy Morrisons and quickly sell the company’s properties.
But in a turnaround yesterday, Legal & General said it backed CD&R’s £7bn bid last week.
Andrew Koch, senior fund manager at Legal & General, said: “A key concern is the lack of information about the value of the property portfolio.
With more competitive bids, the bidding parties will have paid close attention to this during their due diligence.
“This gives us some comfort that real value must be realized for shareholders.”