Big loss for Tchenguiz as Iceland crisis forces Sainsbury's share sale
Move follows sale of Iranian tycoon's shares in pub group Mitchells & Butlers
Thursday 09 October 2008
The property tycoon Robert Tchen-guiz sold a massive stake in a UK company for the second consecutive day, when his shareholdings were liquidated yesterday.
Mr Tchenguiz sold his 10 per cent stake in Sainsbury's, the grocer, at 250p a share through Kaupthing, the troubled Icelandic bank. A huge sale of the bank's assets was kicked off yesterday. The UK's Financial Services Authority forced Kaupthing's UK banking subsidiary Kaupthing, Singer & Friedlander into administration yesterday.
The sale of Mr Tchenguiz's stake in Sainsbury's followed the sale of the tycoon's 25 per cent stake in Mitchells & Butlers, the pub group, for £137m to the British billionaire Joe Lewis on Tuesday. A market source said: "We understand that he [Tchenguiz] now has no shares or economic interest in Sainsbury's."
In further drama yesterday, Mr Tchenguiz seems poised to sell his 22 per cent stake in SCi Entertainment, the listed holding company of Eidos, the publisher of the Lara Croft Tomb Raider computer games. Aaron Brown, a key lieutenant of Mr Tchenguiz at his investment vehicle R20, stepped down from SCi Entertainment's board yesterday. Shares in SCi Entertainment fell by 15.6 per cent.
The revelations about M&B, Sainsbury's and SCi Entertainment intensified speculation that Mr Tchenguiz's personal fortune may be starting to unravel, although he remains solvent and holds a myriad of other investments.
The firesale of Sainsbury's shares further illustrated that the fallout from the financial turmoil in Iceland could potentially wreak havoc among UK businesses. Many industry observers believe that Baugur, the Icelandic investment group with a controlling stake in large swathes of the UK high street, could be forced into a firesale of its UK assets. Baugur has stressed on numerous occasions over the past week that its UK retail businesses – including the fashion chain Karen Millen, the frozen food retailer Iceland and toy specialist Hamleys – are unaffected by the financial eruptions in Iceland.
The sale price of 250p a share for Mr Tchenguiz's stake in Sainsbury's represents a massive discount on the price the Iranian tycoon paid for the grocer's stock and leaves him nursing losses of hundreds of millions of pounds.
He bought some of the Sainsbury's shares for between 525p and 590p before a potential bid for Sainsbury's by the Qatar Investment Authority, which collapsed in November 2007. Mr Tchenguiz's 10 per cent shareholding in Sainsbury's comprised 7 per cent in ordinary shares and 3 per cent in contracts for difference.
City sources said that investors had over-subscribed by more than two and a half times to snap up Sainsbury's shares at the knockdown rate. Yesterday, Sainsbury's shares fell by 47p, or 15.7 per cent, to 267.75p, although investors were also concerned about a downturn in the grocery sector.
Mitchells & Butlers also confirmed yesterday that Aaron Brown and Tim Smalley, both lieutenants of Mr Tchenguiz at R20, have stepped down as non-executive directors "with immediate effect."
Mr Tchenguiz and his investment company, R20, declined to comment. He has controlling investments in pub groups the Globe Pub Company, Town & City Pub Company and Bay Restaurant Group, but his plans for them are unclear. He is also close to cashing in his lucrative stake in Somerfield, the local grocery chain, which is being acquired by rival grocer the Co-operative Group.
Yesterday, the accountancy firm Ernst & Young was appointed administrators of Kaupthing Singer & Friedlander (KS&F). In a statement, EY said the administration has been necessary because of KS&F's financial position and to protect retail depositors and maintain the stability of the UK financial system. Maggie Mills, a joint administrator at EY, said: "We would like to stress that all retail savers' deposits are properly protected. All retail deposits with Kaupthing which relate to the internet-based Edge accounts have been transferred to ING Direct, a wholly owned subsidiary of ING Group, which operates through its branch in the UK."
The administration capped another tumultuous day for Iceland's crippled financial system. Yesterday, the government cancelled the purchase of a 75 per cent stake in Glitnir Bank and handed the lender over to regulators, after realising it was in bigger trouble than previously thought.
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