For the second time in as many weeks, the Qatar Investment Authority (QIA) has purchased stock in J Sainsbury, the UK supermarket chain it tried to acquire last year for £10.5 billion (Dh76bn), in a move that may renew talk of another takeover attempt. The QIA owns a 26 per cent stake after buying 12.4 million shares between June 25 and last Wednesday, Sainsbury, the third-largest British food retailer, said yesterday. It previously held 25.3 per cent.
The Gulf emirate's bid for Sainsbury, at 600 pence (Dh43.61) a share, collapsed in November in the aftermath of a worldwide credit crunch, and demands by the grocer's pension fund trustees made the transaction too expensive. Speculation about a renewed offer circulated last week as the authority boosted its holding for the first time since a restriction on bidding expired. Sainsbury stock has lost a third of its value this year on concern that discount supermarkets will win market share, as higher mortgage, fuel, tax and utility bills sap UK consumers' disposable incomes.
Qatar's Delta Two, the government-backed investment fund that proposed the bid, has been free to make another offer since May's expiration of a so-called lockout period of six months, mandated by UK takeover rules. They were attracted by Sainsbury's property assets, which the chief financial officer, Darren Shapland, said in May was worth as much as £8.6bn. Property values have dropped since Sainsbury became a bid target last year, and lending restrictions by banks have made shares of companies with property assets less attractive. Commercial property values in the UK, Europe's largest market for property investment, declined for an 11th month in May.
Qatar planned to spend £3.5bn to build and renovate stores. The authority invests surpluses generated by the emirate's reserves of natural gas, the world's third-largest, as well as crude oil, and has stakes in companies from the Swiss bank, Credit Suisse Group, to the London Stock Exchange. Sainsbury and Tesco, the biggest UK food retailer, have cut prices in an effort to draw shoppers. Stock in Sainsbury declined 6.5 per cent on Wednesday as the UK retailer Marks & Spencer said its food unit had the worst quarter in at least a decade. Its shares fell more than 20 per cent on the news last week.
Sainsbury's share of the UK grocery market slipped 0.3 of a percentage point to 15.9 per cent in the past three months, said Taylor Nelson Sofres, a leading global market research firm. Last month, it reported a slowdown in its first quarter underlying sales growth, with most of the increase accounted for by rising prices. Stripping out sales from new store openings and fuel, like-for-like sales were up 3.4 per cent in the 12 weeks to June 14 from a year earlier, compared with a 4.1 per cent rise in the previous quarter.
The price of fuel has risen about 20 per cent in the past year, although its impact on profit is marginal. Total sales rose 8.1 per cent in the same 12-week period. At the time, the Sainsbury chief executive, Justin King, said the "challenging economic environment continued throughout the quarter". But he added: "while we anticipate that the environment will remain challenging, we operate from a strong financial position and our expectations for the full year remain unchanged".
* with Agencies
