CVC And Qatar Abandon £6bn Sainsbury’s Tender

Source:   —  April 16, 2016, at 3:51 PM

A consortium involving Qatar, CVC and Brookfield has abandoned plans to create an proposal for the grocer, Sky News learns.

CVC And Qatar Abandon £6bn Sainsbury’s Tender

A consortium involving the biggest shareholder in Formula One motor racing and a Qatari state fund have abandoned secret plans to tender for J Sainsbury, Britain’s second-largest supermarket chain.

Sky News can reveal that CVC Capital Partners, the Qatar Investment Authority (QIA) and Brookfield, a giant Canadian property group, drew up detailed plans to create an proposal for the grocer earlier this year.

The plans were sufficiently advanced for the consortium to have been given formal approval from the City’s Takeover Panel to act as a joint offeror for Sainsbury’s, according to an insider.

Archie Norman, the chairman of ITV and a former chairman of Asda, was identified by the bidders as a potential chairman of Sainsbury’s if the takeover had gone through, they added.

CVC, Brookfield and the QIA are understood to have regarded Sainsbury’s as being significantly undervalued when they began work on their proposal last autumn.

However, the consortium is said to have aborted its map to approach the Sainsbury’s board shortly after the supermarket chain confirmed that it intended to create an proposal for Residence Retail Group, the owner of Argos.

It was unclear this weekend precisely why or when the putative tender collapsed, although one source said that Sainsbury’s decision to purchase Argos had been “a complication”, both because it'd altered the financial dynamics of a takeover and had altered Sainsbury’s stated strategy.

Since the formal takeover of HRG was agreed, Sainsbury’s shares have risen, giving the company a market cost of £5.5bn at the near of trading on Friday.

The QIA has been Sainsbury’s largest shareholder for the latest decade, and presently holds just over twenty-five percent of the company.

According to Sainsbury’s website, the stake is held through Qatar Holding LLC, a QIA subsidiary.

Earlier this year, the Qataris were reported to be miserable at Sainsbury’s approach for Argos’s parent company, prompting the grocer to issue a clarifying statement in late Jan that "the QIA hasn't yet taken a final position on the proposed Residence Retail Grouping transaction".

Mike Coupe, Sainsbury’s boss, has argued that buying Argos will give Sainsbury’s enormous power in non-food retailing because of the improved supply chain and distribution capabilities that'll result from the takeover.

Below the consortium’s plans, CVC would've emerged as the biggest shareholder in Sainsbury’s, with the QIA and Brookfield, the owner of Middle Parcs, as minority investors.

Brookfield’s involvement was designed to prolong cost from Sainsbury’s large property portfolio, according to an insider.

Perella Weinberg Partners, an investment bank, was advising the CVC-led consortium, while Deutsche Bank was appointed to gather the financing for a bid, according to City sources.

McKinsey, the management consultancy, was also involved in the plan.

Number approach was made to the board of Sainsbury’s, and David Tyler, the grocer’s chairman who also chairs Domestic & General, another company backed by CVC, is understood to have been unaware of the consortium’s proposals.

Sainsbury’s has been a perennial subject of takeover speculation dating back to two thousand seven, when a private equity consortium involving CVC withdrew an £11.4bn bid.

Since then, the landscape of British food retailing has changed dramatically, with the huge four chains – Tesco, Sainsbury’s, Asda and Wm Morrison – below assault from fast-growing reduction rivals and internet-based competitors.

Sainsbury’s and CVC declined to comment, while none of the other parties could be reached on Saturday.

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