LONDON (Reuters) – Takeover target J. Sainsbury is allowing Qatari-backed investment fund Delta Two access to its books, the companies said on Thursday, the latest stage in a 10.6 billion pound bid tussle.
In a revised bid proposal, Delta Two, which already owns 25 percent of the country’s third-largest supermarket group, made no change to its 600 pence offer but raised its equity funded portion by 850 million pounds.
The new offer comes after weeks of wrangling between the two parties over the structure of the original debt-heavy offer, which has been exacerbated by the global credit squeeze.
“No part of this funding will represent a liability of the existing Sainsbury’s group,” the companies said in a statement.
Sainsbury shares traded up 2.8 percent at 569.1 pence per share at 9:45 a.m., the second-highest gainer in the DJ Stoxx index of European retailers.
Seymour Pierce analyst Richard Ratner said it was moot whether Delta Two had done enough to ensure Sainsbury’s financial stability by raising the equity share and to prevent the Office of Fair Trading calling in the bid.
“Morever, there are still the issues of the family and the pension fund. This is not a done deal yet. It is still too close to call,” Ratner said in a research note.
Sainsbury family members, who hold a combined stake of around 18 percent, torpedoed a bid for the supermarket group from a private equity consortium in April this year.
The revised proposal sees 4.85 billion pounds in funding by way of ordinary shares, preference shares and payment-in-kind notes and debt worth 9.6 billion pounds.
The 600 pence per share offer price equates to a multiple of 40.8 times Sainsbury’s earnings per share for the 52 weeks ended March 24, 2007, the statement said. Tesco, Britain’s largest supermarket group, trades at 17.5 times this year’s earnings, data from Reuters Estimates showed.
Tony Campbell, former deputy chief executive of Asda Group, part of world leader Wal-Mart, would become non-executive chairman of Sainsbury, should the bid succeed, the companies said.
Sainsbury’s shareholders will receive an interim dividend of 3.0 pence per share. The banks backing the debt financing of the bid — ABN AMRO, Credit Suisse and Dresdner Kleinwort — had also provided new commitment letters.
The lengthy tussle over Sainsbury is being closely watched by other players in the fiercely competitive sector for any sign it will trigger change in its strategy.
Sir Ken Morrison, chairman of the country’s fourth-largest grocer WM Morrison Supermarkets, said on Thursday a decision one way or the other on Sainsbury’s ownership couldn’t come too soon.
“Everyone is looking forward to a conclusion to the situation,” Morrison told reporters during a conference call on its half-year earnings.