J Sainsbury has asked Delta Two to consider either increasing its 600p-a-share indicative offer or improving the terms of its £10.5bn takeover proposal as the two sides met Wednesday for another round of talks.
The supermarket chain is thought to have told Paul Taylor, who manages the Qatari-backed Delta Two investment fund, that the proposed deal as it stands is still extremely difficult to deliver with the continued opposition of the Sainsbury family, which own 18 per cent of the shares between them.
Sir Philip Hampton, the chairman, is weighing up the offer not just on price, but on whether the deal will be approved by shareholders in the face of the family opposition. A person familiar with the situation said Wednesday night that the deal as it stood was “quite easy to frustrate. The question has to come back on to price”.
It is thought that two other institutional shareholders representing 2-3 per cent of the shares have told Sainsbury that they do not want to sell at 600p-a-share, while the dead register for the shares stands at 3-5 per cent, making a 75 per cent approval rate very difficult to push through. Delta Two requires this level of acceptances because it makes financing the deal cheaper.
Meanwhile, Robert Tchenguiz, who holds 10 per cent of the stock through shares and derivatives, is also thought to think 610p-a-share or above is a fairer price. The enterprise value of the deal is £12bn, including net debt.
Sainsbury is also keen that Delta Two improves the terms in an effort to win round the family, who have cited the value of the bid, the leverage around the company and the future pension funding as areas of concerns.
The board would like Delta Two to prepare some sort of proposal for pension trustees, who are frustrated because they have yet to meet Delta Two. The board has also asked the investment fund to offer more assurances over the long-term arrangement for the properties, given that family concerns over a possible sale-and-leaseback of the £8.6bn property portfolio. It is thought the two sides will meet again next week.
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