Qatar seeks to buy Sainsbury
The Qatar investment fund has offered a 600p-a-share for J Sainsbury, valuing the retailer at almost $24.61billion (£12bn), including debt. This is second bid for the British supermarket chain this year. Delta two Ltd., which owns 25 percent of Sainsbury, confirmed that it is holding “preliminary” talks about a cash offer. To finance the deal Qataris have lined up debt financing from Credit Suisse, Dresdner Kleinwort and ABN Amro. They plan to borrow $17.02 billion (£8.3bn) to finance the deal, putting up $7.58 billion (£3.7bn) of cash, if the bid is successful. Qatari royal family is fascinated with the Sainsbury’s huge market assets, continuous growth and its futuristic business module and wants to get lucrative pie out of it. Paul Taylor, an adviser to the Qatari royal family in charge of the Sainsbury investment, said: Sainsbury meets the fund’s objective of focusing on strategic, long-term investments in exceptional businesses, principally in Britain, which have strong incumbent management teams, leading market positions and long-term growth opportunities Qatari royal family seems confident about the deal as they assume that major shareholders Delta (Two) is supportive of the company’s operational strategy. It is understood the Qataris’ plan is to expand the Sainsbury’s brand overseas, opening stores in the Middle East, Korea and China, where the Qatar government has strong links. However, expert likes James Bevan, who is chief investment officer at CCLA Investment Management in London, warns that yet it’s not a done deal. Merger can be tensed and can stretch further as we can’t rule out the possibility of third party to challenge the existing Qatar investment’s bid. Sainsbury family shareholders united, who owned 18 percent shares, have already opposed the bid. On the other side, Delta two has already cleared its intention that it has a high regard for the board, management and employees of Sainsbury and is supportive of the company’s operational strategy. Paul Taylor is also not confident about the successful deal as it can take unexpected turn. Merger news pushes Sainsbury shares as much as 2.5 percent up, closing in London at 590.50 pence, which is up by 0.9 percent. That augmented London based company’s market value to more than $20.4 billion (£10bn). The family has successfully blocked an earlier bid, but latest foray kindle the hope for the merger. Notion is strengthened as Sir David Sainsbury, the largest family shareholder, met the prime minister of Qatar, last week in Sardinia. Now this deal seems viable, as new law regulates British retailers and pub owners to operate separately thus allowing property divisions to trade independently as real estate investment trusts.
