Critical week for Sainsbury bid – Fishupdate.com

Critical week for Sainsbury bid Published:  17 September, 2007

A £10.7-billion Middle East bid for the supermarket group J Sainsbury, which describes itself as Britain’s largest fishmonger, is expected to reach a critical make or break point this week.

The company’s pension liabilities are thought to be one of the main barriers in the way of a successful takeover by Delta Two, the Qatari royal family backed fund.

The Sainsbury board is likely to open its books to Delta Two in the next two or three days.

But the pension trustees are almost certain to demand that the Qatari’s pay millions of pounds into the scheme to secure its future. It is believed the trustees, led by chairman John Adstead, are in a particularly strong position because there is a clause in the supermarket chain’s pension trust that allows Adstead to demand increases in the company’s contributions if there is a change of ownership.

Another barrier to a successful bid has been the amount of debt Delta Two plans to use to finance the £10.6bn takeover. Delta Two is reported to have agreed to reduce the amount of debt finance it plans to raise from £6bn to around £5.5bn, but it is not clear whether the board thinks the concessions proposed go far enough.

The Sainsbury family, which controls 18 per cent, has argued the company’s competitive position could be jeopardised if it was saddled with costly borrowings at a time when interest rates are rising. They would also object to any plan to separate the company from its £8.6bn property estate.

There are worries that if the deal goes ahead Sainsbury’s would cease to be able to compete as it wouldn’t have any flexibility in its margins, said an analyst. And that would delight rivals like Tesco and Wm Morrison as well as worry the Competition Commission.

Meanwhile, the chief executive of Asda has said that grocery and fish prices do not have to rise because supermarkets are taking a more environmentally friendly approach. Andy Bond said food retailers could save money by going green – and use that cash to cut prices.

Mr Bond told The Guardian that the recent TV advertising campaign, featuring celebrities such as Ian Wright cooking fish and Victoria Wood as a baker, was designed “to dispel the myth that low-priced food is crap”. He said some sections of the media were out of touch with ordinary consumers and he “would like (journalists) to come and talk to ordinary shoppers in our supermarkets” before criticising low prices.

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