Sainsbury's shares rise 5pc on Qatari bid speculation
Shares in J Sainsbury, the UK's third-largest supermarket, rose by almost 5pc on Wednesday on renewed speculation about bid interest from the Qatar Investment Authority (QIA), which holds a 26pc stake in the retailer.
In 2007 the QIA-backed Delta Two investment fund launched a £10.6bn, 600p-a-share, indicative bid for Sainsbury's. The deal came to nothing after a drawn-out tussle and a war of words with members of the Sainsbury family.
However, the QIA has retained its stake in the supermarket and analysts have noted that it has recently started buying Sainsbury's shares again. It was reported that Credit Suisse, the investment bank, is among a team of advisers working on a deal that could happen over the summer.
QIA has recently been on a buying spree in the UK. In the spring Qatar Holdings, the investment arm of QIA, bought London department store Harrods for about £1.5bn. It has also bought the US Embassy building in Mayfair for £440m, among other buildings.
George Godber, a fund manager at Matterley Asset Management, which holds an investment in Sainsbury's, said that the retailer appears to be undervalued. He added that Sainsbury's market capitalisation is £6.4bn and yet its freehold property is likely to be worth £10bn or more.
"On top of that Justin King [Sainsbury's chief executive] has done a superb job. And there is more to go for. Sainsbury's is only doing a 3.5pc margin while other supermarkets do 6pc," Mr Godber said.
However, industry insiders dismissed the bid talk out of hand.
They said that the QIA has its hands full with Harrods and has within the last few days taken the largest stake in Agricultural Bank of China (AgBank) after its dual IPO in Hong Kong and Shanghai. AgBank's flotation had strong backing from a raft of sovereign funds.
A spokesman for Sainsbury's said that the company does not comment on speculation. Shares in the retailer closed up 16.1p at 344.3p.
Late last year David Tyler, Sainsbury's new chairman, said that he had held meetings with large shareholders, including the QIA.
Sainsbury's shares jumped 10pc in one day last October after speculation swept the market that Qatar's sovereign wealth fund was planning a renewed offer. At the time traders reported talk of an offer at around 420p a share, which would value the chain at more than £7.5bn.
By James Hall, Retail Editor
Published: 6:00AM BST 08 Jul 2010
