Sainsbury’s Surge Batters Predators
THE chances of a winning privateequity bid for J Sainsbury faded today after the supermarkets chain unveiled a storming set of sales figures as it set out to convince the City that its future as a public company is bright. Sainsbury’s has been on the defensive since a private-equity consortium led by CVC said in February that it was considering a bid, perhaps of i11 billion. After unveiling
like-for-like sales up 5.9% in the fourth quarter, chief executive Justin King said: “We are getting on with running the business. We are still doing a great job for customers and shareholders.” The numbers were better than expected, strengthening the company’s hand in fending off a takeover. Given the size of the Sainsbury’s pension fund deficit, which is put by the trustees at up to i3 billion, and the boom in the share price over the past few weeks, the private-equity group may walk away. Citigroup said in a note today that even if the consortium does make an offer, it would immediately be outbid by Asda’s US parent Wal- Mart. Analyst David McCarthy said: “Asda would have the benefit of up to i1 billion of synergies, and would not face the same pension issues as the consortium.” Citigroup thinks a fair price for Sainsbury’s shares is 400p, suggesting the current 557p is somewhat frothy. On the day of his third anniversary as chief executive, King declined to comment on how much contact he has had with the bidders in the past few weeks but indicated he is looking forward to 13 April i the date by which the consortium has been ordered to launch a formal offer or walk away. Sainsbury’s trading statement was a clear attempt to present itself as a company with a heart. It plugged the i7 million donated to Comic Relief, its Fairtrade bananas deal and the drive to encourage people to eat more vegetables. King is on track to double profits since he took the helm. The City is expecting pre-tax profits of i360 million for 2006, up from i267 million a year ago. Asked if he calculated what a takeover could net him personally, he replied: “I know if I say no, you won’ t b e l ieve me. But no, I haven’t.”
WOOLWORTHS is dragging itself into the 21st century by betting its customers will embrace the internet, and shop via its Big Red Book catalogue. Catalogue and online sales rose more than fivefold in the year to 3 February but sales from the traditional staples of sweets and music were poor. Group profits fell to i16 million from i61 million the year before. “I cannot see how any retailer
can exist without a multichannel offering,” said beleaguered chief executive Trevor Bish-Jones. Like-for-like sales in the past two months are up 0.8% against a fall of 6.6% last year. The final dividend is frozen at 1.34p.
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