Sainsbury board keeps Three Delta waiting

Three Delta continues to seek access to the books of UK supermarket Sainsbury’s, as difficulties in the credit markets look certain to affect the price of the £6 billion of debt needed for the offer.

The board of UK supermarket Sainsbury’s has resisted Qatari investment company Three Delta’s demands for access for due diligence, citing three issues: price, deliverability and financing, according to the company’s spokesperson.

The two parties met again yesterday but the board is still refusing to open its books to the investment company.

A banking source close to Three Delta, which is carrying out its bid through special acquisition vehicle Delta Two, has said the offer is a 30 times multiple to Sainsbury’s earnings. Given Sainsbury’s shares are trading 5 percent below the offer price the investment vehicle’s current offer is strong, he said

The source said: “Meaningful meetings can only take place with the company’s pension funds once due diligence begins and so we would very much like the board’s support.”

However, Sainsbury’s spokesperson is concerned that the tightening of the debt markets may cause problems for the bid. Sainsbury’s is also worried about the prospect of the leveraged structure of the bid.

The bid is financed through £4.6 billion of equity and £6 billion of debt. The investment firm intends to invest £3.5 billion over the next five years to fund store expansion, refurbishment and the development of Sainsbury’s non-food offering.

According to Sainsbury’s annual report it has £7.2 billion of property, which may be a target for a sale and leaseback strategy.

Three Delta has a 25 percent stake in the supermarket.