Sainsbury's expected to recommend takeover offer
Supermarket giant Sainsbury’s is this week expected to recommend a revised takeover offer from Qatari investment group Delta Two, it was reported today.
The investment group is understood to have won the backing of Sainsbury’s pension fund after holding formal talks with its trustees, according to the Independent on Sunday.
But the Qatar-based fund is understood to have offered £1bn (€1.4bn) to the scheme, made up of cash and property assets from the Sainsbury’s portfolio, to safeguard members’ benefits.
Delta Two has been stalking Sainsbury’s since July, and it is thought the pension scheme, which has 85,000 members and £4.25bn (€6.1bn) of funds under management, was a potential sticking point in the saga.
But the Sunday Express today warned that the scheme’s trustees were holding out for up to £2bn in return for backing the bid – double the £1bn that is thought to have been put on the table.
The trustees have hired Penfida Partners as advisers – the same firm used by the Boots scheme trustees in negotiating a package worth more than £1bn in security payments and instalments from the group’s bidders.
Sainsbury’s opened its books to Delta Two last month after the fund submitted a revised proposal aimed at easing concerns about the level of debt involved in the proposed offer.
The highly leveraged nature of the deal has been criticised by the Sainsbury family, which owns 18% of the shares.
But the change in terms will now see the potential takeover funded with £4.85 billion in shares and payment-in-kind notes guaranteed by the State of Qatar, an increase of £850 million.
The Sainsbury family, which had feared the deal would leave the group without the financial flexibility it needed to compete with its rivals, is now expected to back the bid.
Delta Two is run by the Qatar Investment Authority, whose chief executive is Sheikh Hamad bin Jassim bin Jaber al Thani, prime minister of Qatar and a member of the Qatari royal family.
Meanwhile Sainsbury’s is expected to say it has seen a slowdown in sales when it gives an update on summer trading on Wednesday.
The company posted a 5% rise in like-for-like sales during the three months to June 16 – its 10th successive quarter of growth – but the figures came in below forecasts of 5.5%, and slipped from the 5.9% increase seen in the previous quarter.
Since then both Morrisons and Tesco have both reported weaker trading figures for June and July as the soggy weather and tough comparatives with the World Cup last year impacted results, and Sainsbury’s is unlikely to have escaped this slowdown.
