Andrew Murray-Watson: Good sense costs less at Sainsbury's

My local Sainsbury's still runs out of fresh bagels by about mid-afternoon on most days, but despite its shortcomings, the supermarket would fare no better under the ownership of Delta Two, the Qatari-backed investment fund.

Why? Well, let's recap slightly. Just two months ago, the board of the company refused to entertain an offer from CVC, the private equity group, on the grounds that it undervalued the company at 580p per share. The Sainsbury family, led by Lord Sainsbury of Turville, who together hold 18 per cent of the shares in the retailer, quite rightly said that there was no reason to sell out when the buyer brought nothing new to the table. His logic was straightforward and powerful: what could private equity do for the company that we cannot do ourselves for the benefit of our shareholders? The answer was: nothing.

So what does Delta Two offer? As it stands at the moment, precious little. Firstly, let's dismiss the simplistic notion that Delta Two is backed by an Arab state with untold billions in petro-dollars that needs to be spent fast. If so, where is the cash in this deal? Delta has said that the offer would be funded by £6bn of debt finance and £4.6bn in "equity and debt-related instruments".

Despite great attempts to convince the world that the Qataris are long-term investors, this bid, which is sure to be revised higher in due course, bears striking resemblances to the CVC approach. Delta Two, like CVC, wants to split Sainsbury's the retailer from Sainsbury the property company and place billions of pounds of debt on the group's books. To sugar the pill, Delta Two said it would invest £3.5bn over the next five years into the supermarket chain. Nice number. However, the buyout group fails to mention that the existing management of Sainsbury's is already committed to investing £2.5bn over the next three years.

What's more, we know next to nothing about this Qatari fund. How much cash does it have at its disposal? Who are all its backers? We complain that there is a lack of visibility into private equity companies. This Middle-Eastern investor makes our local buyout companies look as transparent as a pane of glass. John McFall and his sidekicks on the Treasury Select Committee should include Delta Two and its peers in its review of the private equity industry. Delta Two may not call itself a private equity fund, but that is exactly how it is behaving.

Despite that, Lord Sainsbury and his relations are not opposed to a private equity bid per se. But it has to be at a level that takes into account future growth potential at the supermarket. A bid of £6 per share, or even £6.50 per share, may not persuade it to sell. However, Delta Two owns 25 per cent of the company and Robert Tchenguiz, who also wants to break it up into an operating company and a property company, owns a further 10 per cent. Sainsbury's board will have to be very strong to resist pressure from two such powerful investors if they are determined to press their own complementary agendas.

However, this bid looks like the transfer of wealth rather than the creation of wealth.

A long aria for ABN Amro

And so it rumbles on. If the takeover battle for ABN Amro were an opera, it would be Wagner's Ring Cycle. On Thursday, Barclays said it had been given more time to file a revised offer for the Dutch bank and that it was considering "possible alternative structures" to finance the deal. As things stand, Barclays is offering ¿65bn for ABN Amro, compared with ¿71bn by a consortium of RBS, Spanish bank Santander and Belgian bank Fortis. Barclays was due to file its offer by Monday.

The extra time may give ABN Amro's board the opportunity to withdraw its recommendation that its investors accept the Barclays deal. Certainly, it is hard to see why it should now opt for the lower offer. It was more complicated when La Salle, ABN Amro's American operation, was still in play. But since a court said ABN Amro could press ahead with the sale to Bank of America without the approval of its shareholders, matters have become clear. RBS originally wanted La Salle for itself but would have faced a prolonged legal fight with BoA, which already had a signed deal with ABN Amro to take La Salle off its hands. Barclays also has to appease its shareholders in order to make a higher offer. According to Execution, the independent UK stockbroker, Barclays' investors would not support a bid for ABN Amro that tops the offer on the table from RBS. But there may be further twists in this story. Fortis still needs the backing of its investors for Europe's largest-ever rights issue to be able to fund its part of the RBS consortium deal. If it doesn't win that approval, the whole bid may fall apart.

An ill wind for Malcolm

Poor old Malcolm Wicks. The Energy minister can't win. He is busy promoting the Government's green credentials but is being stymied in his own token efforts by his local Conservative council which won't let him erect a wind turbine on the roof of his house. Maybe he should compare notes with Tory leader David Cameron, whose attempts to put up a turbine have run into as many problems.

We can chortle at Mr Wicks's predicament, but planning authorities must be supportive of genuine attempts to increase microgeneration in the UK.