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Highlights
- Sainsbury Plc could be the next target for the possible bidding by the private equity firms after the successful buyout of Morrisons Plc.
- Sainsbury Plc stock is already up by over 40% since April 2021, after Daniel Křetínský, a Czech based billionaire, raised his stake in the company to 9.99%.
Sainsbury Plc (LON: SBRY), the second-largest supermarket chain in the United Kingdom, having a market share of around a 16%, could be the next target of the private equity (PE) firms to buy controlling interest after Morrison’s plc buyout. The shares of the company were up by 14.29% to GBX 336.90.
Last week US-based private equity firm Clayton, Dubilier & Rice (CD&R) outbid the rivals and received Morrison’s board backing for its £7 billion offer to buy the fourth largest supermarket chain in the UK.
Rising Private Equity interest
Sainsbury Plc has property holdings comprising 598 supermarkets and 813 convenience stores. The company also offers financial services and is being targeted for a possible bid from the US-based private equity Apollo Global Management, which was earlier biding for the Morrisons plc but later decided to team up with Fortress. Private equity firms are targeting Sainsbury Plc for its consistent and healthy cash generation business.
According to the market experts, Apollo Global, which initially bid for Morrisons Plc, would have to reconsider its bidding, as any further involvement in buying Morrisons Plc would make Sainsbury Plc buying less likely. Also, market experts predict that Apollo Global could again team up with Fortress to put up a joint bid for the Sainsbury Plc assets.
However, Apollo Global and Sainsbury Plc have not made any official announcement or comment about the potential bids.
Latest financials
Sainsbury Plc reported a 1.6% rise in the first quarter ended 26 June 2021, supported by the higher grocery sales, general merchandise and clothing. Grocery online sales were up by 29%, while the in-store sales were up by 0.8% due to higher in-house consumption because of continued Covid-19 restrictions. As a result, the company plans to accelerate its investment plans on the everyday essentials products, and company’s board expects underlying profits before tax of at least £660 million in the current financial year ending March 2022.
Related Read: Morrisons (LON:MRW) accepts CD&R’s takeover bid. Can you buy this stock for the short term?
Share price performance
Sainsbury Plc shares are up by over 40% since April 2021 and have gained around 79% this year, including today’s rise of over 14%. The stock has been in the news for a possible bid since April when Daniel Křetínský, a Czech based billionaire, raised his stake in the company to 9.99%. Qatar Investment Authority is the largest shareholder in the company, with a 14.99% stake. The company’s current market cap stands at £6871.32 million as of 23 August 2021.
Britain’s supermarket has been attracting a lot of interest from private equity firms as the retail businesses have shown high growth and elevated sales since the pandemic started and changing consumer shopping habits. Also, the share prices of many UK-based firms are lower as the UK stock market has underperformed in terms of returns compared to the world market and continues to trade at a discounted price.
