MAGGIE PAGANO: Does it matter if our supermarkets are foreign-owned?

Off we go again. Another day of takeover fever. Rumours behind the recent sharp rise in Sainsbury’s share price have legs. Apollo, the US private equity firm, is said to be doing the numbers for a possible bid for our second-biggest supermarket chain.

Apollo is not the only likely suitor. It’s also been mooted that the loser out of the two US private equity outfits – CDR or Fortress – targeting Morrisons, could turn to Sainsbury’s instead.

As one analyst says, why would you waste all this highly expensive time and money gunning for Morrisons if you don’t put the effort to good use?

Supermarket sweep: US private equity firm Apollo is said to be doing the numbers for a possible bid for Sainsbury's

Supermarket sweep: US private equity firm Apollo is said to be doing the numbers for a possible bid for Sainsbury’s

Over at Babcock International – another rumoured takeover target – the shares were on the move again, up to 360p and some 22 per cent higher over the month on word that at least two private equity firms are sniffing around the defence contractor.

It’s not at all surprising that the private equity boys are eyeing up Sainsbury’s as it has been a bid target on and off for years. 

Like Morrisons, the supermarket chain has good cash flow, a substantial property estate and has been under-valued by the UK public markets.

The same questions can be asked about Sainsbury’s as are being asked about Morrisons, which is what will these private equity firms have to do to make serious returns on their leveraged bids?

Supermarkets are already among the most tightly-run and well-managed businesses in the UK and have the skinniest of profit margins.

Apart from prices at Waitrose, the Big Four chains are fiercely competitive and food is keenly priced on just about any measure.

If these private equity firms are to win control of Morrisons, or indeed Sainsbury’s, they will strip out costs, slash the number of stores and switch more trading online.

They will have to if they are to make the returns on their money.

Indeed, the idea that private equity owners are under less pressure than their peers running companies in the public arena is nonsense. Inevitably, the customer will lose out, in terms of prices and service.

There is another meatier question to be asked. Is there a risk to food supplies if such a big chunk of the UK’s supermarkets have overseas owners?

If both Morrisons and Sainsbury’s – which together have a quarter of food sales – are taken out by cheap US dollars, that would leave the market leader, Tesco, as the UK’s only publicly listed company.

The third biggest group, debt-laden Asda, with a 15 per cent share, is now privately owned by the Issa Brothers while the Co-op, with 6 per cent, is a mutual.

Foreign owners already have a big footprint. The German-owned Aldi and Lidl chains have around 13 per cent of the market while the Russian-owned Mere discount retailer plans on opening 300 stores in the UK.

One of the most uplifting features of the pandemic was the superb manner in which Britain’s supermarkets and independent shops kept the food flowing.

Masked and visored up, their staff were among the superheroes of lockdown.

Employees helped shoppers form orderly queues, opened up out of hours to serve the vulnerable and kept working in the distribution centres to ensure the shelves were full. 

Drivers turned up to deliver the goods and – despite the most ridiculous national panic – there were enough loo rolls.

Does it matter if a big slice of our supermarkets are foreign-owned? Are food supplies, like defence, a matter of national interest? Food for thought.

Easy landing

Stephen Hester must be a glutton for punishment. After five bruising years handling the bailed-out Royal Bank of Scotland and the sale of insurer RSA, Hester is being parachuted into Easyjet.

It’s not the easiest of times to be taking over the chair at any airline.

Restrictions are still imposed on travel around the world and are likely to last for some time to come.

Add to the pandemic chaos, the pressures from Greta Thunberg and the green lobby to stop people from flying, and you have the most unholy mix.

Then, of course, there is the larger than life Sir Stelios Haji-Ioannou.

The airline’s founder and his family own just under 33 per cent of the business and are well known for bust-ups with the board.

Yet if anyone is up for the jousting, Hester, who has been chief executive of three FTSE 100 companies and known for being something of a bruiser himself, might just be the man for the cockpit.

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source: dailymail.co.uk