Lord Sainsbury recently kicked private equity into touch, leaving it with a nasty flea in its ear. “Sainsbury’s success has been based on a strong balance sheet and a largely freehold property base. Eroding these attributes will make the company more vulnerable to competitive pressures which is not in the best long-term interests of the company, its customers, its staff, its shareholders or its pensioners,” said recently.
And with those words, it seemed Sainsbury, as a plc backed by a valuable property portfolio, was secure.
Private equity may have had a flea in its ear, but the prospect of the company selling its property has come back, like a persistent fly, circling above the ointment.
Throughout this week, a Qatari investment fund, which boasts Qatar Prime Minister Shaikh Hamad bin Jassim bin Jabr Al Thani as a backer, has been building a majority stake in the business. And now it’s been confirmed, the investment fund, Three Delta, in conjunction with the Qatar Prime Minister, now owns 17.4 percent of the supermarket.
Although it is unlikely the investment company is planning to make a bid for Sainsbury’s, it seems likely it’s after the property portfolio.
Another major shareholder in the UK retailer is Robert Tchenguiz, and, funnily enough, Delta Three is run by Paul Taylor, who used to work for Mr Tchenguiz.
There is something else Tchenguiz has in common with the Qatari investment fund. He, too, wants to see the property portfolio sold off.
So you see, may be private equity is not quite the asset stripper its detractors accuse it of being. It’s merely ahead of the game, initiating strategies that market forces were going to force through sooner or later anyway. Perhaps it’s always better to do it sooner.
© Investment & Business News 2013