LONDON (Reuters) – Gulf Arab state Qatar has made a bid approach for J Sainsbury Plc, which newspapers said valued Britain’s third-biggest supermarket group at about 12 billion pounds ($24.5 billion), including debt.
Sainsbury confirmed the approach in a statement on Wednesday, but gave no indication on the price of the proposal, which comes just three months after Sainsbury family members blocked a 10.1 billion pound takeover attempt by private equity firms.
Newspapers said Qatari investment fund Delta Two, which already owns about 25 percent of Sainsbury, was prepared to offer 610 pence a share for the rest of the company.
State-owned Delta Two confirmed it was in preliminary talks with the supermarket group about a possible cash offer but said no decision had yet been made.
The Qatari fund is run by Paul Taylor, a former employee of property tycoon and Sainsbury shareholder Robert Tchenguiz, and invests in businesses with strong management, leading market positions and long-term growth opportunities.
“All of these criteria are met by Sainsbury,” Taylor said in a statement.
Sainsbury’s stock was up 1.4 percent at 593.5 pence by 1000 GMT, outpacing the DJ Stoxx index of European retailers, which was down 0.4 percent, and valuing the company’s equity at around 10.3 billion pounds. It also has debt of 1.5 billion.
A source familiar with the situation said the Qatar approach was “friendly and supportive” and not connected with Tchenguiz, who is said to hold a stake of about 10 percent in Sainsbury.
“We believe the takeout price could be significantly higher than this (610p),” Numis analysts said in a note. “In our view Sainsbury is an attractive investment opportunity, and we are today raising our target price to 700p.”
Shares in Sainsbury had stood at about 445p before news of a possible bid emerged in February, which resulted in a 10.1 billion pound or 582p a share approach from a private equity consortium led by CVC Capital Partners Ltd, ultimately blocked by the Sainsbury family.
The Financial Times on Wednesday quoted people close to the situation as saying the family, which owns around 18 percent of the business, did not support the proposal from Delta Two.
However, Seymour Pierce’s Richard Ratner said in a note: “The members of the family may well roll over” for what he described as a “huge price” proposed by Delta Two.
“Moreover, even without the family’s outright support, the Qataris, not being private equity, might launch an offer.”
One trader said Sainsbury might well accept. “The bottom line will be the family … I fancy the family will take 625 pence, and I think that’s what (Delta) have got in the tank.”
Qatar’s royal family had raised its stake in Sainsbury to 25 percent from 18 percent in June to make it the company’s biggest shareholder, fuelling speculation of a bid.
Analysts have speculated Sainsbury’s 8.6 billion pound freehold property portfolio was the focus for the Qatari group, just as it had been for the CVC consortium.
Tchenguiz has already pressed management to unlock value from its property, but Sainsbury Chief Executive Justin King and Chairman Philip Hampton reiterated last week that keeping the firm’s property was key for its future.
King has led the retailer in a turnaround in the three years since taking the top job. In May Sainsbury reported a 42 percent jump in annual profits and unveiled plans to create 3.5 billion pounds of new sales by 2010 as it expands into clothing.
Sainsbury has nearly 800 stores across Britain with a market share of about 16 percent, employing around 153,000 people.
Last month a person familiar with the situation told Reuters that Tchenguiz had doubled his stake in Sainsbury to around 10 percent from 5 percent. There had also been speculation earlier this month that he was selling his stake.
Neither Tchenguiz nor the Sainsbury family could immediately be reached for comment. Hussein al-Abdullah, executive board member of the Qatar Investment Authority, which controls the Delta fund, declined to comment when reached on the telephone.
Sainsbury shares trade at about 31 times estimated earnings, which is expensive compared with its major peers. Tesco trades at 18 times, Wal-Mart at 16 and Carrefour at 20, according to Reuters Estimates.