As far as some investors are concerned, the icing has gone from the top of J Sainsbury's cake. When the British food retailer announces its half-yearly results this week, a predicted rise of more than 20 per cent in pre-tax profits will be overshadowed by the fall in the share price of the company, which last week became the latest casualty of the US credit crisis.
Sainsbury's shares immediately fell 20 per cent on news that the Qatari investment vehicle Delta Two was pulling its bid for the supermarket chain. The deal had hinged on a further £500m being added to the £10.6bn offer. But Delta Two decided that, in the wake of the global credit crunch, the extra cost of raising capital made the deal no longer attractive.
Analysts at UBS Investment Research said: "The likelihood of another offer is weak."
Regulatory restrictions would prevent Delta Two from making another bid for at least six months, but UBS reports a growing belief in the market that Delta Two might be planning to sell its stake. However, the broker does not believe that Sainsbury's shares have much further to fall, as the company is already trading on similar earnings multiples to rivals such as Morrisons. But UBS is more bullish on Morrisons than on Sainsbury's.
The withdrawal of the Delta Two offer appears to have soured the City's view of Sainsbury's. Dresdner Kleinwort's analysts believe that its shares are now fairly valued.
According to Morgan Stanley, the market should take some comfort from the fact that Sainsbury's is on track to fulfil its new three-year recovery plan.
The analysts' consensus for the first half, which will be revealed when Sainsbury's unveils its interim figures this week, is £231m, representing a rise of more than 20 per cent on the same period last year.Reuse content