Private equity firm CVC was battling to keep its bid for Britain's J. Sainsbury afloat on Tuesday, after its bidding partners pulled out and the food retailer's founding family rejected an improved 10.1 billion pound ($19.9 billion) offer, sources close to the matter said.
Shares in Sainsbury, Britain's third-biggest supermarket group, fell more than 5 percent on speculation that CVC [CVC.UL] would be unable to raise the bid again on its own.
Sources familiar with the situation said buyout groups Texas Pacific [TPG.UL] and Blackstone [BG.UL] had left the bidding team even before CVC had proposed a new offer of 582 pence a share in cash, up 3.6 percent from its previous proposal. Kohlberg Kravis Roberts [KKR.UL] left the private equity consortium last week.
Sainsbury declined to comment, but a person close to its founding family - which owns about 18 percent of the shares - reiterated that it would oppose opening the company's books for a bid of less than 600 pence a share. "What part of 'no' don't they understand," the person told Reuters. David Sainsbury, a former chairman of the company, is the family's biggest shareholder with a 7.75 percent stake.
Newspapers have said other shareholders, such as property magnate Robert Tchenguiz, agreed with the family position. "The sticking point is the family," another source close to the situation said. Sainsbury shares have risen around a quarter in value since February 2, when the CVC team announced its bid plans, on hopes of a take-over battle.
Clothing and food retailer Marks and Spencer has said it would not rule out making a counterbid for Sainsbury, while sources close to the matter have said Britain's second-biggest grocer, Wal Mart-owned Asda, was looking at whether it could get a bid past competition regulators.
CVC has offered Sainsbury employees 15 percent of the company, and another 25 percent of equity has been earmarked for other shareholders who would like to remain investors, sources familiar with the situation said. It also plans to create 16,000 jobs and expand store space by 3 million square feet, one of the sources said, but would not provide further details. If completed, a deal would vie with a possible take-over of British drugs retailer and wholesaler Alliance Boots to be Europe's biggest leveraged buyout.