Sainsbury's bidders in battle to salvage bid

Sainsbury's bidders in battle to salvage bid

A private equity bid for supermarket chain J Sainsbury is on a knife-edge, with the consortium locked in last-ditch talks with management over the bank holiday.

The bid seemed on the brink of unravelling as the bidders struggled to table an offer that the board considered an acceptable starting point.

The consortium, comprising CVC, Blackstone and Texas Pacific, was weakened last week when KKR quit to concentrate on its £10bn bid for Alliance Boots. Other members also showed signs of getting cold feet. Preliminary talks were thrown into complete disarray on Thursday when the Sainsbury family, which speaks for 18 per cent of the equity, made it clear it would settle for no less than 600p for its shares.

Some analysts questioned whether this was a negotiating tactic designed to drive the price above the 562p-a-share offer tabled on Thursday. City sources thought the consortium could raise its bid to 570p, but said 600p was 'a bridge too far'.

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Even though it appears the private equity bid will ultimately fail, some observers remain hopeful that Sainsbury's chairman Sir Philip Hampton would be prepared to open the books if a bid emerged at 570p, despite the family's hardline stance.

Another complicating factor is the pension fund, which may need a cash injection of between £1bn and £3bn to satisfy the Pensions Regulator. A meeting between CVC and the Sainsbury pension fund trustees is pencilled in for Tuesday.

Hampton could then try to persuade shareholders, including the family, that it was worth considering a bid pitched at a 30 per cent premium to the share price before CVC was flushed out in early February. The consortium must table a formal offer by Friday under an order issued by the Takeover Panel.

Lord Sainsbury is the group's second- largest shareholder, with a 7.7 per cent stake. His tough negotiating position is understood to be backed by Robert Tchenguiz, with 4.5 per cent, and Alliance Bernstein, which has 14.9 per cent.

As the private equity firms plan to continue working with the existing management team, sources close to Lord Sainsbury say he does not see why existing shareholders should not reap the long-term benefits of the recovery set in train by chief executive Justin King.

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