Sainsbury's may be bid target as future of family stake is questioned

Click to follow
The Independent Online
SAINSBURY'S, the troubled retail group, was yesterday being seen as a takeover target after the Sainsbury family lawyer appointed advisers to consider what to do with their crucial stake.

Judith Portrait, the solicitor who has acted as trustee over Lord Sainsbury's 13 per cent holding since he was appointed Minister for Science and Innovation in July 1998, has hired investment bank Dresdner Kleinwort Benson after the value of the stake collapsed.

If the trust - which is legally divorced from Lord Sainsbury's influence - puts the pounds 763m stake up for sale, it would effectively end the family's takeover veto and put the troubled retailer into play.

The DKB team, led by corporate financier and equity capital markets director Edward Cumming-Bruce, has not been given a brief to actively market the stake. But it would leave the trust in a position to respond quickly if an offer is put forward.

European giants including Carrefour, Germany's Metro and Ahold of the Netherlands have all been rumoured to be interested in acquiring Sainsbury's. US firm Safeway - no relation of the UK supermarket chain - is also thought to have considered bidding.

Mike Godliman, director of retail analyst Verdict, said he did not expect Sainsbury's to remain independent in the medium term, as margins are eaten away by the supermarket price war. "I think Sainsbury's, Safeway and Somerfield are all likely to be involved in takeovers by European supermarkets within the next couple of years," he said. "It is all about scale now."

Analysts believe the Sainsbury family maintains an influence over strategy that has served the company ill in recent years. "They were so used to being number one, that when Tesco took over at the top they could not cope," said one observer. "Their influence has been a good thing in the past, but now it is no longer a good thing."

Yesterday, Sainsbury's said it would not comment on its shareholders' actions, and added it did not want or expect a takeover approach. "We are dedicated to improving our performance and we are not interested in a takeover. We believe strongly in our brand, and a takeover is not in our strategy," a spokesman said. "The Sainsbury family have always been very supportive of our strategy."

The Sainsbury family has controlled the company since it was founded as a small grocers in London's West End 130 years ago. As well as the 13 per cent stake held by Lord Sainsbury's blind trust, Ms Portrait also runs another 18 per cent in other family trusts while the Sainsbury's hold an additional 9 per cent directly.

Until now the markets have seen no sign of the family wishing to part with them, and this has insulated the company from the threat of a takeover bid, despite its vulnerable position.

Ms Portrait decided it would be prudent to appoint financial advisers after Sainsbury's share price tumbled from an October 1998 high of 580p. Last month the company unveiled first-half profits down 30 per cent, and by the end of last week shares stood at just a fraction over 300p.

With falling sales and analysts' doubts over the sharpness of the Sainsbury's product, the company has rolled out a new brand identity and made management changes to try to revive fortunes. Dino Adriano will stand down as supermarkets chief executive in the New Year but remain as group chief executive.