Sainsbury’s is next supermarket PE takeover target

“Sainsbury’s is the second most attractive target,” says Ioannis Pontikis, equity analyst at Morningstar.

“Tesco has seen a turnaround and the potential for profit margin improvement is not that great, while Sainsbury’s… they still have a lot of fat to burn. A former Sainsbury’s executive adds: “It’s a pretty difficult industry to operate with discounters on one side and probably Amazon on the other. The assets are undervalued and highly cash-generating.

“Of all the targets Morrisons is the easiest to hit, but Sainsbury’s has been speculated [about] for a certain time. Tesco is too big, and then you have the Czech investor. There is a possibility that they will enter. The more you integrate Argos into the domain, the more sense it makes.

In January, it emerged that Sainsbury’s credit default swaps – a type of insurance contract to protect against corporate default – had risen more than 10% since Roberts announced his strategy.

Hedge funds use such investments to bet on companies subject to drifts away from the glare of public stock markets. Sainsbury’s share, meanwhile, is the shortest compared to Tesco and Morrisons. Funds Citadel and Marshall Wace both reduced their positions after details of Morrisons’ offer were released.

Source: FR24

Can’t stop reading? Read more