Delta Two withdraws bid for Sainsbury’s

Delta Two, the Qatari-backed investment fund, has abandoned its £10.6 billion bid for the supermarket giant Sainsbury’s. Shares in the supermarket fell almost 19% in early trading today to 450p following the announcement.

The growing cost of funding the bid and credit market turmoil is said to be responsible for the collapsed bid.

Delta Two has a 25% stake in Sainsbury’s but made no comment on its plans for that investment. The group said it remained fully supportive of Sainsbury’s operational strategy. However, there are concerns that this holding could now be sold.

Rumours have escalated over the last few weeks that the Delta Two bid, backed by the foreign investment arm of the gas-rich gulf state Qatar, was in difficulty.

The bid is worth over £10 billion and there were concerns about how the bid would be funded, with Delta Two being urged by some Sainsbury’s shareholders to pay more cash.

In a statement, Delta Two said its decision to withdraw was due to worries about the turbulence in the credit markets which made it more difficult and expensive to raise the debt required to fund the transaction. In addition, the group raised concerns about funding Sainsbury’s employee pension schemes.

Sainsbury’s said Delta Two’s decision removed uncertainty surrounding the business ahead of the crucial Christmas period and added that it will continue with its “Making Sainsbury’s Great Again” recovery plan. The supermarket chain said it had already delivered 11 consecutive quarters of like-for-like sales growth.

The group is to report interim results next week and at that point will inform investors how it is performing against the new 3-year targets it set in May. Chairman, Sir Philip Hampton, said the group had attractive future prospects and a first class management team.

Chief executive, Justin King, said they remain focused on delivering great service to customers.

Mr King has transformed the Sainsbury’s business since he took on the job 3 years ago. However, it is still behind Tesco and Asda in the UK grocery market.

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