Sainsbury’s considers Qatari £500m equity increase

Qatari investment arm Three Delta is likely to increase the equity component of its offer for FTSE 100-listed Sainsbury’s to meet concerns of the board that the company will be over-leveraged.

The board of UK supermarket Sainsbury’s is considering opening its books to the investment arm of the Qatari government Three Delta, according to a banking source.

The unit’s special acquisition vehicle Delta Two is likely to increase the equity component of its bid for the company by £500 million ($1 billion, €740 million), in an attempt to satisfy the board’s demands for a £1 billion increase in the equity on offer, the source said.  It is not planning to increase the price.

The offer was originally structured as £4.6 billion equity and £6 billion in debt. The Sainsbury family, with an 18 percent stake, raised concerns about the bid’s leveraged structure. In order to secure the company Delta Two needs 75 percent shareholder acceptance for its £6.00 per share bid, effectively giving the family a blocking stake.

Numerous debt syndications have been postponed and re-priced in recent months, most notably in the UK, Kohlberg Kravis Roberts’ take-private of former FTSE-100 company Alliance Boots. Data provider Dealogic estimates the current leveraged buyout debt pipeline of unsyndicated debt is $386 billion (€283 billion). Financial sponsors generated $273 billion of this.

Three Delta declined to comment.