Goldman advises Sainsbury consortium(2)

Three buyout heavyweights CVC, KKR and Blackstone are mulling a bid for the UK-listed grocer on the advice of Goldman Sachs, which would join in, if an offer goes ahead.

CVC Capital Partners, Kohlberg Kravis Roberts and The Blackstone Group have hired Goldman Sachs to advise them in their preliminary assessment of UK retailer Sainsbury’s.

A source said the US bank would almost certainly look to co-invest in the event a bid goes ahead. Goldman is nearing a close on its latest fund, which has raised $10 billion to date.

The three buyout firms confirmed in a statement this morning they were looking at the grocer, a long-term buyout target whose shares have soared on recent speculation that a bid was imminent.

Sainsbury’s share price at 14.00 GMT was up by almost 15 percent to 512.25p, capitalising the business at £8.7 billion (€13.1 billion). If a buyout were to go ahead at this price it would be Europe’s largest buyout, eclipsing the €12.2 billion public to private of Denmark’s TDC, a telecom company.

Analysts have said a price closer to 600p would be needed to encourage shareholders, who have seen their shares rise 50 percent in the last year on its turnaround plans, to sell.

The consortium downplayed the likelihood of a bid: “No decision has been made regarding the relative merits of an offer and as a consequence there can be no assurance that any offer for J Sainsbury will be forthcoming.”

A source close to the team said CVC was the driving force behind the interest in the retailer, which said in response to the buyout firm’s statement: “No proposal has been received.  Accordingly Sainsbury’s has no further comment to make.”

Judith Portrait, the lawyer who controls most of the Sainsbury family trust, fuelled speculation, when she cut the stake from 16 per cent to 13.89 per cent in a sale on Thursday. Lord Sainsbury of Turville is set to take control of his shares, held in a blind trust, later this month.

According to London-based investment bank and broker Numis Securities, buyout firms can afford to bid a premium of up to 38 percent  for Sainsbury’s, financing a buyout through the sale and lease back of stores to the parent company.

Steve Davies, an analyst at Numis, said in a research note earlier this week that the company could be transformed into a real estate investment trust.

The three firms all declined to comment.