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Retail

Private Equity Firms Eyeing Potential Bid For Sainsbury's: Reports

Private equity companies are circling British supermarket group Sainsbury's with a view to possibly launching bids of more than £7 billion (€8.2 billion) for the business, according to newspaper reports.

The Sunday Times reported that American buyout giant Apollo is said to be weighing up the possibility of making a bid for the supermarket group.

It remains in talks to join the Fortress-led consortium bidding for Morrisons, and any involvement in that deal may preclude a move for Sainsbury's, the report said, adding Apollo's interest in Sainsbury's is exploratory.

British supermarket group Morrisons said last week that its board would unanimously recommend U.S. private equity group CD&R's 285 pence a share offer worth £7 billion and drop its previous recommendation for a £6.7 billion bid from a consortium led by SoftBank owned Fortress.

Takeover Activity In UK Market

Last month, Sainsbury's chief executive Simon Roberts declined to comment on the increased level of takeover activity taking place in the UK supermarket sector, telling reporters he was "not going to speculate" on what was happening elsewhere.

Asked if Sainsbury's had received any approaches, Roberts noted, "If we had anything to update on, we'd be updating on it, so we've nothing to update you on."

Sainsbury's reported a 1.6% increase in like-for-like sales in the first quarter of its financial year, to 26 June, with grocery, general merchandise and clothing sales all ahead of expectations.

The group expects to report underlying profit before tax of at least £660 million (€768.9 million) in the financial year to March 2022, with progress weighted towards the first half.

Analyst Viewpoint

Commenting on the news, analyst Ross Hindle of Third Bridge said that a deal could be a "very good" proposition for Sainsbury's.

"Similarly to Morrisons, Sainsbury's is very attractive to private equity investors because of its property portfolio," he said. "Sainsbury's also has two other advantages, a very loyal customer base and a strong digital strategy.

"Timing is also a factor. After 18 months of disruption, every big grocer has capacity expansion plans, especially for their digital businesses. These have accelerated so much that some colossal choices need to be made about how shopping is going to evolve over the next decade. Sainsbury's somehow needs to make the right call on whether innovations like instant grocery delivery are really going to take root and potentially build further infrastructure."

News by Reuters, edited by ESM. For more Retail news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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