Sainsbury's ponders £9.7bn bid

Supermarket giant Sainsbury’s was today mulling a £9.7bn (€14.25bn) indicative offer from its private equity suitors amid reports that major shareholders of the firm are holding out for a higher bid.

The private equity bidders – CVC, Blackstone and Texas Pacific Group – are understood to have tabled the approach of around 560p a share for the UK’s third largest food retailer yesterday.

The offer level is near the mark of the firm’s current 561p share price but shareholders are looking for a higher bid to open the books to the bidders, according to reports.

Sources close to the Sainsbury family, which owns 18% of the business in total, said that they would be unwilling to back a bid of less than 600p a share - pricing Sainsbury at £10.4bn (€15.3bn) – the Times newspaper reports.

Other major shareholders, including Iranian entrepreneur Robert Tchenguiz – who has a near-5% stake – and fund manager AllianceBernstein, which owns 14.9%, are also thought unwilling to sell at the current price, the newspaper says.

The Sainsbury’s board is expected to make an announcement on Tuesday over the indicative approach. The company was unavailable for comment today.

Reports of the opposition to the level of the bid are another setback to the private equity bidders who have struggled to reach agreement with the trustees of the supermarket chain’s pension fund over a potential £3bn (€4.4bn) deficit.

A fourth private equity firm, Kohlberg Kravis Roberts, also pulled out of the consortium on Thursday.

KKR is also involved in a £10bn (€14.7) bid for high street pharmacist and drugs wholesaler Alliance Boots and is understood to be concerned over the competition implications of an approach for Sainsbury’s at the same time.

The private equity trio first announced it was looking into the possibility of a bid for Sainsbury’s at the beginning of February.

Last week the supermarket chain shrugged off the bid speculation to post better than expected sales figures for the first three months of the year.

Sainsbury’s said like-for-like sales, excluding petrol, for the 12 weeks to March 24 were up 5.9%, ahead of analysts’ predictions of between 5% and 5.5%.