Qatari royals become top Sainsbury shareholders

16 Jun, 2007

Qatar's royal family raised its stake in British supermarket group J. Sainsbury Plc to 25 percent, fuelling expectations on Friday it could face its second take-over approach in as many months.
While Delta (Two), the secretive investment vehicle owned by the Gulf Arab state, did not reveal its reason for the 732 million pound ($1.4 billion) raid that raised its stake from 18 percent, Sainsbury shares rose to a record high on bid talk. "This could be a precursor to a full bid," Citigroup said in a note which raised Britain's third largest supermarket chain to "hold" from "sell".
The swoop, which made Qatar Sainsbury's biggest shareholder, comes after Sainsbury family members in April blocked an 10.1 billion pound approach from a private equity consortium led by CVC Capital Partners Ltd.
The rejection irritated some shareholders who had hoped for a windfall from the buyout and subsequent property selloff. The CVC consortium focused on releasing value from Sainsbury's 8.6 billion pound freehold property portfolio, triggering a revaluation of the real estate assets of rivals Carrefour, Tesco and WM Morrison.
The Sainsbury family and the supermarket group's management, who last month refused to stage a private equity-style property selloff, declined to comment on the stakebuilding. Delta (Two) was not available for comment but analysts speculated real estate was also the focus for the Qatari group.
David Buik at financial bookmakers Cantor Index said Delta should be able to gain control of Sainsbury, particularly if it was able to bring onside another Sainsbury shareholder Robert Tchenguiz. Property tycoon Tchenguiz, who holds a 5 percent stake, has already pressed management to unlock value from its property.
Delta (Two) said it had paid 595 pence per share in its latest raid, a level close to the 600 pence per share the Sainsbury family - with an 18 percent stake - set as a minimum it would accept for a private equity bid. The Qatari fund is run by Paul Taylor, a former employee of Tchenguiz who ran his Rotch investment vehicle. Analysts said it was probable he bought the shares from hedge funds who built stakes during private equity's stalking of the group.
Retailers' property ownership has divided the industry with some financial investors pushing for asset sales, while chief executives such as Tesco's Terry Leahy maintain owning a majority of its real estate it vital to a chain's success.
Sainsbury Chief Executive Justin King, who has led its turnaround in the past three years, said in May the majority of Sainsbury's investors shared the view the company did not need to sell property or be taken private in order to perform.

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