by Sarah Butler and Siobhan Kennedy
The Qatar-based investment fund Delta Two tabled a preliminary offer of £10.44 billion for J Sainsbury yesterday, reigniting a battle over the future of Britain’s third-largest supermarket group.
Shares in Sainsbury’s rose 5p to 590½p after the grocer said that it had received its second takeover approach in six months, after a failed bid attempt by CVC Capital, the private equity firm.
Sources said that Delta Two, a fund backed by the Qatar Investment Authority, sent a letter yesterday to the board of Sainsbury’s outlining a 600p-a-share offer. They said that the board was due to meet in the next two days to discuss the offer and decide whether or not to open its books for due diligence.
It is understood that the bid will be funded using £3.6 billion of cash, a £1 billion payment-in-kind loan and £7.8 billion of debt, including Sainsbury’s existing £1.8 billion borrowings.
The debt has been underwritten by Delta Two’s advisory banks Dresdner Kleinwort, Credit Suisse and ABN Amro, sources said. Including the debt, the offer values Sainsbury’s at £12.2 billion.
Sources said that the group would seek to invest about £3 billion to help Sainsbury’s to expand overseas, using the Qatari Royal Family’s influence in regions across the Middle East, South Korea and China. They added that the group had no plans to sell any of Sainsbury’s lucrative property portfolio.
Last week Delta Two, which has been building a stake in the supermarket group and now owns a 25 per cent holding, flew key members of the Sainsbury family to Sardinia to discuss its proposals. However, sources said that the family, which blocked CVC’s takeover bid, are understood to be reluctant to accept a highly leveraged offer.
The other key player is Robert Tchenguiz, the property entrepreneur, who controls about 10 per cent of the supermarket. He said yesterday that Sainsbury’s board now had only two options – to accept the Qataris’ offer, or to implement his plan to split the business into separately listed property and operating companies.
“Doing nothing is no longer on the agenda,” a spokesman said. It is understood that Mr Tchenguiz and Delta Two are not working in concert.
In a statement, Paul Taylor, whose company Three Delta advises the Delta Two fund, said that the Qatari investment group was interested in “long-term investments in exceptional businesses, principally in the UK, which have strong incumbent management teams, leading market positions and long-term growth opportunities.
“Three Delta has a high regard for the board, management and employees of Sainsbury and is supportive of the company’s operational strategy.”
It is understood that Delta Two has yet to meet Sainsbury’s pension fund trustees. However, John Adshead, the chairman of the trustees, is likely to demand at least £1 billion to shore up the fund in the event of a collapse of the business.
While it is possible that CVC, or another private equity firm, could reenter the race for Sainsbury’s, it is thought unlikely that any would chose to do so. Sources reiterated yesterday that CVC did not see value in the supermarket group at the 600p-a-share level.
It would also be much harder for the buyout firm this time around, given that the Qataris now have a 25 per cent blocking stake.
Why do I say that all items that are considered HARAM shall be eliminated?!? Because of something similar happening in the United States concerning none other than CARIBOU COFFEE:
[Star Tribune]:Porn, pork and Pabst — you're safe from them at Caribou Coffee. In an SEC filing last week for its initial stock offering, the Brooklyn Center-based coffeehouse chain noted that it operates its business according to the Islamic principles known as Shari'ah."
A Shari'ah-compliant company is prohibited from engaging in derivative hedging transactions such as interest rate swaps or futures, forward options or other instruments designed to hedge against changes in interest rates or the price of commodities we purchase," Caribou said in its filing. "Also, a Shari'ah-compliant company is prohibited from dealing in the areas of alcohol, gambling, pornography, pork and pork-related products."
...
The story is no longer available at the link provided...
[and]
From JihadWatch.org:
"Will Caribou's Shari'ah Affect Shares?,"
When my Foolish colleague W.D. Crotty recently gave investors a good look at the newly public Caribou Coffee (Nasdaq: CBOU - News), there was one interesting detail he omitted. And this detail, if misunderstood by the investing public, could cause some rather significant problems in the future. After the deal is done, Caribou Coffee will still be controlled by its primary investor -- Arcapita Bank, formerly known as First Islamic Investment Bank. Those who run Arcapita (and its subsidiaries) do so according to Islamic principles collectively known as shari'ah (or shariah or sharia). Shari'ah encompasses a wide range of rules and customs, including some that directly impact the running of a business.
Specifically, shari'ah influences how the company borrows or lends money, how it may engage in derivative transactions, and what sorts of products it may sell. On the subject of borrowing and lending, shari'ah can be a bit confusing, and there is disagreement within the Islamic community as to what constitutes acceptable or unacceptable transactions. While Caribou has borrowed money in the past, investors should realize that negotiating future borrowings that comply with shari'ah could take a little time and might impair the company's access to quick sources of capital.
Other areas are decidedly clearer. Caribou will not engage in derivative transactions, which could impair the company's ability to hedge future coffee prices. Elsewhere, the company will not be engaging in activities pertaining to alcohol, gambling, pornography, or pork. I don't see how any of the first three will have any bearing on running a coffee shop to compete with the likes of Starbucks (Nasdaq: SBUX - News) or Peet's Coffee (Nasdaq: PEET - News), but I suppose it's conceptually possible that not being able to sell pork products (like a ham sandwich or bacon wrap) could hurt Caribou's standing with some customers.
The bigger risk in my view, though, is ignorance. Islam is not exactly well understood in this country, and there are a lot of people who go into knee-jerk reactions when they hear the word. Accordingly, companies in the U.S. like Caribou and its sister
company Church's Chicken that run themselves according to shari'ah may be the
unfair targets of malice, bias, and flat-out ignorance from time to time.
...
Arcapita Bank, here is the first paragraph of a message from the CEO [back in 2005]:
With the backing of our founding shareholders, we began our operations in 1997
with a vision to build a new kind of investment firm, capable of providing innovative Shari’ah-compliant alternative investments. Today, we employ 142 people at our three offices in Bahrain, Atlanta and London, and have completed investment transactions with an aggregate value of $7.8 billion. Over the past seven years, our net income has grown at a compounded annual growth rate of more than 45 percent to $70.5 million, and our balance sheet has grown twelvefold to more than $1.2 billion as of December 31, 2004.
...
and that message today:
About Arcapita - - - CEO Message
Since we began operations in 1997, we have created a leading international investment bank, staffed by a world-class team that sources the highest quality alternative investments from across the globe. We offer investors a diversified series of investments that target long-term returns exceeding those that conventional equity markets can offer on a consistent basis. As of March 31, 2007, we had completed 59 transactions with a transaction value of over $18 billion across our corporate, real estate, asset-based, and venture capital lines of business. We have succeeded in creating strong returns for our investors, as well as growing our net income for shareholders at an annual rate of 32 percent, whilst our balance sheet footing has grown to $2.7 billion.
Through our network of offices in Bahrain, London, Atlanta and Singapore, Arcapita targets economically attractive sectors and regions, has far-reaching deal sourcing networks and actively manages its corporate, real estate, asset-based and venture capital investments with highly experienced management teams and leading real estate professionals. Ever since the outset, we have invested steadfastly in Arcapita’s global footprint and we see the benefit, in the quality and diversity of the opportunities that we bring to our investors.
The backbone of the business is supported by a carefully cultivated corporate culture that encourages teamwork, innovative thinking and integrated decision making. We have continuously emphasized a focused strategy, recruiting and retaining the best people, a flat and participatory management structure, maintaining a solid capital base and effectively managing the risk in our business. The alignment of the interests of employees, shareholders and our investors has also been of great importance. We believe that these factors have driven our success, and will continue to do so in the future.
ZERO INFORMATION ON SHARI'AH COMPLIANCE - - - TAQIYYA - - - STEALTH ISLAMIC FINANCE
Pertinent Links:
1) Qataris move in with £10.4bn offer
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