J Sainsbury, the UK grocery retailer, yesterday opened its books to Delta Two, the Quatari-backed investment group, taking it a step closer to delisting and following Alliance Boots, the UK pharmacy group, into private hands.
Delta Two reconfirmed its proposed offer price of 600 pence per share in cash. This offer price would represent a multiple of 40.8 times the earnings per share of Sainsbury's in the year to 24 March 2007, it said.
Sainsbury's shareholders would also be entitled to receive an interim dividend of 3.0 pence per share which the board of Sainsbury's would intend to declare for the period ending 6 October 2007.
Sir Philip Hampton, chairman of Sainsbury's, said: “We have held extensive discussions with Delta Two over a number of weeks and believe that their revised proposal is comprehensive and, if it results in an offer, that offer would be recommendable to shareholders.”
Before reaching agreement on a process for due diligence, Delta Two and Sainsbury's held extensive discussions on Delta Two's proposed capital structure and its plans for the business, including the implications for stakeholders.
Delta Two has increased its equity component from £4.6 billion to £4.85 billion, adding in £250 million of equity, while reducing the component of payment in kind notes.
Preference shares have increased from £500 million to £1.3 billion and are backed by the state of Qatar through its Qatar Investment Authority.
ABN Amro, Credit Suisse and Dresdner Kleinwort have re-committed to debt facilities totalling £9.6 billion
Tony Campbell, former deputy chief executive of ASDA Group would become non-executive chairman of Sainsbury's following completion of any offer by Delta Two.
Sainsbury's would also adopt the guidance in the Walker Report relating to enhanced reporting and disclosure standards for privately-owned companies. The firm is the first to pledge explicit support for the code.
Delta Two said its business plan is focused on growth, envisaging £3.5 billion of capital investment over the next five years to fund new store expansion, the continued refurbishment of existing stores, further development of Sainsbury's non-food offering and continued investment in infrastructure.
It has said it would not pursue an ‘op co, prop co’ structure allowing the company to sell-off property assets, a strategy common to most retail buyouts and which was widely reported to be a worry for the Sainsbury family, owners of an 18 percent stake.