Sainsbury’s shares surge 13% as takeover rumours excite investors
Shares in Sainsbury’s soared by more than 13% on Monday morning as investors shrugged off attempts to dampen down rumours that Britain’s second-largest grocery chain could become the industry’s next takeover target.
The grocer shot to the top of the FTSE 100’s risers board as traders piled in following claims that private equity groups are circling with a view to launching multi-billion pound buy-up bids.
Early trading volume spiked to almost 19 times the 20-day average, with 3.72 million shares changing hands in the first hour after markets opened, lifting the supermarket’s price per share 38.6p to 333.30p — a seven-year high — and taking its total market capitalisation to £7.7 billion.
The Sunday Times yesterday claimed that New York investment giant Apollo is “running the rule” over Sainsbury’s, adding further fuel to the feeding frenzy in the sector where Morrisons is at the centre of a £7 billion takeover tussle.
Apollo was only said to be taking a “exploratory” look, and analysts at specialist investor Shore Capital played down the rumours, describing the report’s headline as “rather sensational”.
But analysts at UBS were more positive, saying: “This news yet again highlights the attractive FCF [free cash flow] based valuation of the UK supermarket assets with a growing profit pool as the discounters’ threat is largely neutralised and the profitability of the large online businesses improves.”
Sainsbury’s most recently revealed first-quarter comparable sales growth of 1.6%, and it is focused on embedding more of its 2016 acquisition Argos’s collection points within stores.
Earlier this year Vesa Equity Investment, the firm co-founded by entrepreneur Daniel Kretinsky — nicknamed the “Czech Sphinx” — increased its stake in Sainsbury’s to 9.99%.
Vesa said at the time the move reaffirmed its long-term interest “in acquiring strategic minority participations in publicly listed companies across the wider food retail distribution segment”.
Other major shareholders in the business include Qatar Holdings.
Sainsbury’s declined to comment, as did Apollo, which sources said has not appointed any advisers or lawyers related to the grocer.
Shares in Morrisons also edged up slightly this morning, 0.46p to 291.46p, as the City waits to see if a consortium led by US investor Fortress will attempt to beat rival suitor Clayton, Dubilier & Rice’s latest 285p per share offer.
Rival bidder, a Fortress-led consortium which Apollo has looked at supporting, most recently made a 272p per offer. The latter suitor is “considering its options”.
