Sainsbury’s shares soar on bid talk: US buyout firm Apollo rumoured to be weighing up an offer worth more than £7bn for UK’s second biggest grocer
Shares in Sainsbury’s rocketed yesterday amid speculation it could be gobbled up by private equity.
New York-based buyout firm Apollo is said to be circling the supermarket and is weighing up an offer worth more than £7billion or 300p per share.
Apollo has been in the market for a UK supermarket for the past couple of years and last year lost out to the Issa brothers and TDR Capital in the battle for Asda.
New York-based buyout firm Apollo is said to be circling Sainsbury’s and is weighing up an offer worth more than £7bn or 300p per share
Sainsbury’s is attractive to US bidders due to the supermarket’s large property portfolio in the South-East.
The grocer built up the property empire under John Sainsbury, who during the 1970s and 80s went on a buying spree across the Home Counties.
Clive Black, analyst at Shore Capital, said: ‘The property portfolio is to die for in the South-East. The deals under John Sainsbury were fantastic.’
Another private equity house understood to be circling Sainsbury’s is CVC Capital.
Back in 2016 CVC, the Qatar Investment Authority and Canadian property group Brookfield drew up detailed plans to make an offer for the supermarket.
The plans reached an advanced stage and former ITV chairman Archie Norman was pencilled in to be chairman had the takeover gone through.
The fresh takeover talk sent Sainsbury’s shares up 15.4 per cent, or 45.3p, at 340p, although some were quick to pour cold water over a possible deal.
Apollo remains interested in Morrisons, which is being fought over by CD&R and Fortress.
Apollo wants to join forces with Fortress and form a consortium for the supermarket.
City sources said discussions between Fortress and Apollo for Morrisons are ongoing and that they remain the number one priority for Apollo at this stage. ‘Apollo won’t pivot until we know what has happened to Morrisons,’ the source said.
A deal for Sainsbury’s could also be complicated for Apollo. Earlier this year Vesa Equity Investment, the firm co-founded by Czech entrepreneur Daniel Kretinsky increased its stake in Sainsbury’s to 10 per cent.
Other major shareholders in the business include Qatar Holdings, which has a 14 per cent stake.
Convincing them that the company should go private would not be straightforward. The interest in Sainsbury’s comes amid a frenzied year for private equity, which has been snapping up under-valued UK assets since the pandemic began.
Fresh data reveals that over the past 12 months US private equity funds have made 65 acquisitions in the UK, up 57 per cent.
James West, partner at law firm Mayer Brown, said: ‘US groups have huge amounts of cash to deploy and they prefer the UK when targeting deals as it has a similar culture and regulation to the US.
‘UK central government and local government don’t have the reputation amongst investors for intervening in commercial decisions of businesses that some countries in the EU have.’
Nevertheless the Government is increasingly starting to show its teeth, particularly in the defence sector where Business Secretary Kwasi Kwarteng has launched a probe into the takeover of Ultra Electronics by private equity firm Advent.
Kwarteng has ordered the competition regulator to examine the deal after warning that foreign investment ‘must not threaten national security’.
L&G in U-turn as it backs swoop on grocer
Morrisons moved a step closer to falling into the hands of private equity after the UK’s biggest fund manager gave Clayton Dubilier & Rice (CD&R) the green light.
Legal & General had been a fierce critic of CD&R and in June said the private equity firm ‘would not be adding any value’ to the supermarket.
A month later Legal & General also warned ‘it is important that Morrisons isn’t taken over for the wrong reasons’.
The firm had been concerned that CD&R would buy Morrisons and quickly sell-off the company’s property assets.
But in a U-turn yesterday Legal & General said it was backing last week’s £7billion offer from CD&R.
Andrew Koch, senior fund manager at Legal & General, said: ‘A significant concern has been the lack of disclosure around the value of the property portfolio.
With more competitive bids being made, the bidding parties will have paid close attention to this during their due diligence.
‘This gives us some comfort that the true value should be realised for shareholders.’