Is Sainsbury’s next in line for the equity vultures? American buyers ‘are looking to swoop’ on supermarket giant, analysts say
- Major American buyout group Apollo said to be interested in buying Sainsbury’s
- Three of UK’s ‘big four’ would be owned or joint owned by a private equity firm
- Firm Clayton, Dubilier and Rice (CD&R) struck a deal to buy Morrisons last week
Sainsbury’s could be next on the shopping list for private equity predators as the £7billion Morrisons deal puts the spotlight on UK supermarkets.
Major American buyout group Apollo is thought to be among the firms eyeing up Sainsbury’s, Britain’s second-largest grocer.
City analysts believe it would be a natural next target after the £6.8billion takeover of Asda last year and a recent bidding frenzy for Morrisons.
Clayton, Dubilier and Rice (CD&R) struck a deal to buy Morrisons last week.
This gazumped an existing £6.7billion deal with a group called Fortress – although Fortress has indicated it could put in an even higher bid.
Regulators at the Competition and Markets Authority are already understood to be monitoring the CD&R deal over concerns about the number of petrol stations a combined firm would own.
Major American buyout group Apollo is thought to be among the firms eyeing up Sainsbury’s, Britain’s second-largest grocer (file photo)
There are around 8,000 forecourts in the UK – and a unified CD&R and Morrisons would have 1,200 or so.
Regulators ordered the Issa brothers, Asda’s buyers, to sell 27 petrol stations to get their deal over the line.
Private equity vultures have swooped on a slew of British companies since the Covid crisis began – with the AA, security firm Ultra Electronics and generator supplier Aggreko among those targeted.
Stock markets were thrown into turmoil when the pandemic struck and many UK firms are being picked off because they are trading at bargain prices.
A swoop on Sainsbury’s could mean three of the ‘Big Four’ supermarkets – Tesco, Sainsbury’s, Morrisons and Asda – would be owned or joint-owned by private equity firms.
The Issa brothers, owners of EG group, used private equity cash from TDR Capital to launch their takeover of Asda, which was previously owned by US retail titan Walmart.
Private equity firms often work on a model that aims to restructure, break apart and sell off parts of a company within three to five years – making them questionable buyers for key UK companies.
Apollo has been in talks to join the Fortress consortium that is waiting in the wings to make another bid for Morrisons. But City sources say it is taking an ‘exploratory’ interest in Sainsbury’s too, the Sunday Times reported.
Last year, Apollo invested £1.3billion in US group Albertsons, which owns the Safeway supermarket chain.
Talk of a Sainsbury’s takeover was sparked earlier this year when an investor known as the ‘Czech Sphinx’, Daniel Kretinsky, bought around £300million of stock from the Qatar Investment Authority.
City analysts believe Sainsburys would be a natural next target for Apollo after the £6.8billion takeover of Asda last year and a recent bidding frenzy for Morrisons
The Qataris are Sainsbury’s largest shareholder – and they and Czech Sphinx own around a quarter of the company between them.
More than a decade ago the Qataris and another US private equity firm, CVC, tried separately to buy Sainsbury’s – but to no avail.
And in 2019, competition regulators blocked a mega-merger between Sainsbury’s and Asda – which they said would lead to increased prices in stores, online and at many petrol stations.
Sainsbury’s is now worth around £6.9billion – though many think it is undervalued – and has about 112,000 employees and 1,400 stores.
The FTSE 100 company has a well-established online shopping operation but, despite booming online sales last year, it racked up a £261million loss.
It had spent £485million on Covid costs including PPE and cover for staff who were off sick or isolating. It was also hit by £423million in restructuring costs.