Sainsbury's has shrugged off failed takeover bids, says King

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The Independent Online

J Sainsbury's chief executive Justin King said yesterday that the supermarket's strong first-half results clearly showed the management team had their "minds on the job despite the potential distraction" of two failed takeover bids.

Delivering a 27 per cent increase in pre-tax profits, Mr King shrugged off any disappointment he may have felt about missing out on a potential multimillion-pound payout should a £10.6bn bid from the Qataris have succeeded. He said: "I am proud to be sitting here today still running the business."

The retailer continued to rule out splitting off the company's entire property assets into a separate company despite pressure from shareholders, most notably the Iranian entrepreneur Robert Tchenguiz, who has a 10 per cent stake in Sainsbury's and is now sitting on considerable losses.

However, the company unveiled details of a joint venture with Land Securities under which it would spin off three properties worth £113.4m for future development.

Its chairman Sir Philip Hampton said "there was no big bang solution" on property and the move, which is being seen as a small but significant step for Sainsbury's, is unlikely to appease Mr Tchenguiz, whose holding has fallen by almost 26 per cent in value since Delta Two pulled out. Peter Baguley, Sainsbury's property director, said the joint venture would allow it to maximise the potential at each site "while retaining operational control and flexibility".

An upbeat Mr King said the management team were pleased "to have been part of an exciting time in Sainsbury's history, part of a successful company making a real difference to customers", dismissing suggestions they were disappointed at not realising long-term incentive bonuses ahead of schedule after the share price plummeted.

Since deciding not to go ahead with an offer, Delta Two has made it clear it is supportive of the management team, Sir Philip said. The investment fund, owned by the Qatar Investment Authority, has built up a 25 per cent stake in Sainsbury's. Paul Taylor, head of Delta Two, blamed the decision to pull the proposed offer on the downturn in the credit markets and a significant increase in the equity the company would have needed to secure backing from the company's board and pension trustees.

The supermarket pleased the City with a 4.7 per cent increase in turnover to £10bn. Pre-tax profits came in at £240m for the six-month period to 6 October, while like-for-like sales excluding fuel grew 4 per cent. However, despite an earlier rise, its shares fell 3 per cent over the day. Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers, said the figures "serve as a testimony to management, forging ahead with the group's recovery plan, despite the massive distraction of two aborted takeover attempts in the background". But he added that the plight of shareholders needs to be remembered. "Sainsbury is by no means 'off the hook', with significant share stakes still being held by predatory investors and pressure on management to further enhance shareholder value remaining intense," he said.

* Asda's chief executive Andy Bond said he was confident the supermarket would have a good Christmas despite consumers having less money to spend. "Value retailers will do well," he said, adding that a basket of core goods from Asda was £2 cheaper than from Tesco and Sainsbury's, a claim that Sainsbury's disputes. Mr Bond added that he was co-operating fully with regulators investigating dairy price fixing and refuted claims that Asda was alone in talking to the Office of Fair Trading. "I would be amazed if everybody hadn't been in discussions with the OFT," he said. Analysts said like-for-like sales growth at Asda was comparable with Sainsbury's at around 3.5 to 4 per cent.

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