Qataris drop £11bn Sainsbury takeover
The Qatar Investment Authority today walked away from its £10.6 billion takeover bid for J Sainsbury, sending shares in the supermarkets giant plummeting.
Delta Two, the QIA fund bidding for Britain's third-biggest grocer, abandoned its bid after a row over an extra £500 million in equity needed to keep the 600p-a-share deal alive.
It blamed the crisis in the credit markets, which has made raising funding more expensive, as well as the demands of the Sainsbury pension trustees.
The collapse of the deal follows months of wrangling between the Qataris, the Sainsbury board and pension trustees and opposition to the deal by the Sainsbury family, which owns about 18% of the shares.
It means Sainsbury chief executive Justin King misses out an £11 million windfall while banking advisers to the Qataris and Sainsbury will lose more than £100 million in fees.
It is the second attempted takeover of Sainsbury to collapse this year after an earlier approach by a privateequity consortium led by CVC was abandoned in April.
Shares in the supermarkets group dived 105p to 450p today, wiping nearly £2 billion off its value.
"This is clearly negative news for Sainsbury's share price in the short term," said Numis analyst Jose Marco, who slashed his price target from 600p to between 475p and 500p.
"We believe today's news will also knock the shares of other food retailers, especially Morrisons," he added.
Delta, headed by British property entrepreneur Paul Taylor and holder of 25% of Sainsbury, tabled its bid in early July but due diligence was not granted until September.
At the 11th hour it emerged the QIA would have to find an extra £500 million to meet the demands of the pension trustees and provide enough working capital to keep the supermarket competitive.
Delta today said it was "not in the best interests of stakeholders to proceed". It said the "deterioration of credit markets" meant the "cost of capital has increased significantly".
Taylor said: "Delta Two has strict investment criteria and has approached this opportunity in a disciplined manner. Having given careful-consideration to the additional funding requirement and its impact on prospective investment returns, Delta Two has regretfully concluded that a recommendation to proceed with the proposed transaction would not be in the best interests of stakeholders and therefore such a recommendation cannot be made."
He said Delta Two "remains fully supportive" of Sainsbury management.
King has led a revival at the supermarket, which has delivered 11 consecutive quarters of like-for-like sales growth.
He said: "Interest in Sainsbury has been borne out of the company's success to date in implementing its recovery strategy. We have remained focused on delivering great service to customers over recent weeks and months and have made significant progress towards Making Sainsbury Great Again."
