CVC-led group makes first approach to Sainsbury

The private equity consortium linked with a bid for Sainsbury has reportedly made its first tentative approach to the UK retailer, as it considers making a bid ahead of its April 13 deadline.

The private equity consortium mulling a £9.5 billion (€13.9 billion; $18.4 billion) bid for Sainsbury, the UK supermarket chain, has reportedly made its first approach to the retailer, a week after the UK Takeover Panel issued it with a “shut up or put up” deadline.

According to the London-based Times newspaper, CVC Capital Partners, the UK buyout firm leading the bid, approached Sainsbury on Monday with draft details of its offer, believed to be above 550 pence per share. This would value the chain at about £9.5 billion, making it Europe’s largest buyout to date.

Last week the UK Takeover Panel gave the CVC-led consortium a “put up or shut up” deadline of April 13 to make a bid for Sainsbury. If it fails to do so, it cannot lodge a bid for at least six months thereafter.

The paper said Monday’s meeting was purely a verbal discussion, and no formal proposal had been made. It added that CVC is wary of braving public opinion and submitting a proper bid until it has more information on the company’s pension deficit, while Sainsbury is eager to know what the consortium’s plans would be for the group’s property portfolio.

CVC is working with The Blackstone Group, Kohlberg Kravis Roberts and Texas Pacific Group as it considers a bid for Sainsbury. The consortium first said it was mulling a bid on February 2, and has since seen the share price increase by more than 20 percent – making it increasingly difficult for the group to pay a premium if and when it submits a bid.

At 14:47 GMT today, shares in Sainsbury were up 9 pence to 530 pence, giving the company a market capitalisation of £9.2 billion.

KKR is simultaneously working on another deal that could also become the largest European buyout to date – the £10 billion acquisition of health and beauty chain Alliance Boots. KKR has already had one bid rejected, but is thought to be considering coming back with an improved offer.