CVC finally gave up the ghost this afternoon and dropped its attempt to buy J Sainsbury. Yet, having escaped the bid, Sainsbury’s management are far from free. We’ll explain in more detail tomorrow the considerable pressures the company and its board are now under and analyse what this episode means for other public-to-private deals in this country.
For one thing, a large group of shareholders – the family, Robert Tchenguiz and possibly Alliance Bernstein – have indicated they expect chief executive Justin King to maintain the share price well above 600p, whereas, interestingly, the board had signalled to CVC that 582p was high enough. But there will be much else besides for chairman Sir Philip Hampton to worry about now.
Many will cast the Sainsbury family, and particularly Lord (David) Sainsbury, as the villains who used their minority shareholding to deny other investors an attractive offer. But that isn’t right. The family may well have good grounds for thinking a – highly conditional – offer of 582p inadequate, especially if Tchenguiz did too. And you can’t blame the family if private equity’s financing means that CVC needed 75 per cent approval for its bid and thus gave the family’s 17 per cent stake disproportionate significance.
What I would love to know, though, is where this all went wrong. That the CVC-led consortium would need the backing of the family has been blindingly obvious for years. They must surely have sought and obtained, however indirectly, some reason to believe the family would be open-minded about an offer at a significant premium, and 40 per cent is surely that. If so, something hardened the Sainsburys’ position. We have theories but still no answers.
The other good story today is that Royal Dutch Shell is paying $352.6m to a group of non-US institutional investors, plus costs, to settle claims after they saw the value of their stakes fall after the reserves restatement scandal of 2004. The company refuses to admit any wrongdoing. US investors will get the same deal, the company said.
Very interesting also to see that one of the property sector’s biggest bulls, Mike Prew at Lehman Brothers, has turned neutral on the sector. The sector is down as a result – British Land, Slough Estates, Land Securities are all off. Perhaps Mr Prew has been reading our very own Jim Pickard.
Hideous figures from Moss Bros with profits down nearly 18 per cent last year. The group said the Baugur-led investment group which owns nearly 30 per cent of the business is appointing two directors to its board. What Baugur’s Jon Asgeir Johannesson was telling us in the paper this morning about wanting to do more deals may help explain why Moss Bros shares are up a touch today.
Rumour of the day: M&S shares are up on hopes, distant ones surely, that it will be the next target for private equity funds. FT Alphaville is suitably sceptical. There is talk also of a bid for Northgate Information Solutions.