Sainsbury’s shares rise, with supermarket as buyout target | Mergers and Acquisitions

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Sainsbury’s was the FTSE 100’s first hike on Monday, with investors betting the supermarket chain could be the next takeover target after U.S. firm Fortress, which narrowly missed a bidding battle for Morrisons over the weekend, has said she was still keen to buy a UK business.

Sainsbury’s shares rose nearly 5% to 298p, while Tesco was also a top performer on the UK blue-chip stock index, up 2% to 253p, as traders speculated on where Fortress and other private equity firms might focus their attention. .

Joshua Pack, a financier for Fortress, reiterated the expressions of interest made by the company over the weekend. “The UK remains a very attractive investment environment in many ways and we will continue to explore opportunities to help strong management teams grow their businesses and create long-term value,” he said. -he declares.

Softbank-owned Fortress was narrowly beaten by Clayton, Dubilier & Rice (CD&R) in the Morrisons auction, offering 286p per share versus 287p per share from CD&R, which valued the Bradford-based chain at 7.1 billion pounds sterling.

“Fortress, which was unlucky in Morrisons’ offer, seems eager to close a major deal, so one has to wonder if Sainsbury’s is the next logical company to tick all the right boxes for the US dealmaker,” said Russ Mold, director of investments at AJ Bell.

Meanwhile, the Morrisons chairman has said he expects CD&R to keep its word and hold onto the retailer’s assets rather than sell them, if shareholders approve the deal in a vote to be held on October 19.

Andrew Higginson said: “They gave a list of commitments which I think under the current legislation is as good as it gets. And these are very strong commitments: to keep the company as it is, to keep the head office in Bradford. “

He also downplayed concerns over the UK supply chain crisis caused by the nationwide shortage of heavy truck drivers across Britain. He said the supply crisis had been well publicized but was “slightly exaggerated”, adding that he did not expect any disruption to Christmas deliveries.

“[Christmas] tends to come every year, and everyone seems to be sort of ready for it, “Higginson told BBC Radio 4’s Today show.” So, no, I think it’s going to be a good Christmas for people. , I think people will want to treat each other as they usually do. There are some logistical issues right now, and I think they’re kind of well publicized and a little over the top, but you know the UK supply chains are incredibly efficient and I’m sure we can deliver. a great Christmas to customers. as we go through.

The supermarket boss will step down if the buyout continues, and Sir Terry Leahy, CD&R advisor and former Tesco boss, is expected to be named Morrisons’ new chairman.

“I imagine having him on their list would be a very smart move,” Higginson said. “I mean, obviously I know Terry very well having worked with him for several years, and he will be a very good president for the company.”

CD&R has tried to address concerns expressed by politicians and unions that the wave of private equity takeovers could result in UK companies being stripped of their property holdings, overburdened with debt and lowered standards. of work.

“I think private equity has a bad reputation,” Higginson said.

“Obviously there are good and bad [private equity firms], as in any population. But overall, private equity is all about growth and trying to make businesses grow, and that’s how they generate returns: by improving businesses and restarting them, you know, a few more years. late. “

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He pointed out that CD&R owned B&M, which he said proved that the private equity owner was interested in “growing the business and creating value” rather than trying to extract money. wealth by “a kind of financial engineering”.

CD&R made an estimated profit of around £ 1 billion after selling its remaining stake in the discount retailer in 2018.

A spokesperson for the Department for Business, Energy and Industrial Strategy said: “The government recognizes that foreign investors play a major and positive role in stimulating economic growth in all parts of the UK. In most cases, it is fair that mergers are treated as a business matter for the parties involved and we continue to monitor the situation. “


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