Sainsbury’s stock soars on takeover speculation

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Rabbit prices in British supermarkets jumped today amid speculation that they could be targets for private equity bids.

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Sainsbury’s rose 13.8p — or 4.8% — to the top of the FTSE 100. Tesco was the second biggest riser with a gain of 1.6% and Ocado was up 1%.

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The area has gained momentum following the conclusion of the bidding war for Morrison over the weekend. Private equity firm CD&R won an auction on Saturday with a 287p-a-share bid. The proposal is valued at £9.8 billion, including loans to Morrison. CD&R saw competition from a consortium led by Fort.

American investor Fort is left with significant dry powder to spend and Joshua Pack at the firm has fueled speculation that Fort may return to bid elsewhere in the region.

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“The UK remains a very attractive investment environment from many perspectives, and we will continue to explore opportunities to help strengthen our management teams grow our businesses and create long-term value,” Pack said in a statement.

Analysts see Sainsbury’s as an obvious alternative target. The supermarket has reportedly already hired boutique consultant Robbie Warshaw to help prepare for a potential takeover bid.

Sophie Lund-Yates at Hargreaves Lansdowne said: “A weaker pound and lower interest rates mean that UK companies may look more attractive now than they are in a while, and did not rule out further offers to UK businesses. May go.”

Morrisons follows Asda as the second major supermarket to come into private equity hands this year. Investors are attracted by the supermarket’s strong cashflows, asset holdings and the relative value offered by UK public markets.

The acquisitions have fueled concerns about potential job losses, alienation of assets and under-investment in the area. Private equity is known to use aggressive strategy to increase returns.

Morrison’s chairman Andy Higginson told the BBC Today program that private equity “gets a little worse” but was “focused on growth and trying to grow the business”.

CD&R has promised to be a responsible owner and stated that it intends to continue to implement the company’s current business plan.

Shares of Morrison fell 11.2p, or 3.7%, to 285.8p today after the weekend’s auction failed to reach levels expected by some investors and analysts. Shareholders will vote on whether to approve the acquisition on October 19.

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