UK - CVC not going to try anything new today at Sainsbury's

sarah
11 April 2007

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CVC has announced that it is to bow out of the attempt to acquire the UK's third largest supermarket chain Sainsbury's. It represents the end of an 18-month planning period for the private equity group, which first expressed its intentions to bid for the FTSE 100 company in February. An announcement which prompted public debate about the industry as a whole.

CVC's indicative offer of 582p per share valued the company at £10.1bn but was not enough for the Sainsbury family who collectively own approximately 18% of the company and stated they were unwilling to sell for less than 600p per share. Other minority shareholders voiced similar reservations about the offer and consequently, the board of Sainsbury's refused to open the books. Yesterday, CVC faced further difficulties after Blackstone and TPG withdrew from the bidding consortium, following KKR's move last week. The additional burden of not having reached an agreement with the Sainsbury's pension fund contributed to the collapse of the bid, which had it gone ahead would have represented Europe's largest ever private equity deal.

Since the beginning of CVC's interest, the rise in the price of Sainsbury's shares perhaps suggests that the public market had undervalued the company - shares have been hiked from a pre-bid price of 432.5p to a high of 561p on 5 April. CVC's recognition of value has sparked a correction in the price. The Takeover Panel's deadline passes on Friday, following which CVC will be unable to make another offer for the company for six months. Sainsbury's shares fell to 526p today.