U.S. News

Wal-Mart's Asda Mulls Sainsbury Bid

Reuters
WATCH LIVE

Asda, the British unit of Wal-Mart Stores, is taking advice on whether a bid for rival supermarket chain J. Sainsbury would break competition rules, sources familiar with the matter said on Monday.

Asda was looking to contact relevant regulatory authorities to explore the feasibility of it bidding for Sainsbury should a private equity consortium launch an offer for Britain's third-biggest supermarket owner, one of the sources said.

"Asda is interested in getting involved in some way with Sainsbury," a second source added.

It would have to consult regulators on the available options, whether that meant a full bid for Britain's third-largest supermarket group or buying any assets that private equity buyers chose to sell, the source added.

A spokesman for the Competition Authority declined to comment.

Nobody was immediately available for comment at Asda or the Office of Fair Trading.

A group of private equity firms said on Feb. 2 it was considering making an offer for Sainsbury, setting off a wave of speculation about possible rival bidders for the retailer.

Britain's takeover watchdog has set an April 13 deadline for a decision to be made by the group, which includes CVC Capital Partners, Blackstone Group, Kohlberg Kravis Roberts and Texas Pacific Group.

Tchenguiz Ups Stake

U.S.-based buyout firms Bain Capital and Apollo are also considering teaming up to make a counter-offer for Sainsbury, a source familiar with the matter told Reuters earlier this month.

Asda Chief Executive Andy Bond declined to comment last month on talk he could be considering a bid for Sainsbury. He has said he could consider acquiring convenience stores, an area where Sainsbury and larger rival Tesco dominate.

Property tycoon Robert Tchenguiz, through his R20 investment fund, also increased his stake to 4.15% in Sainsbury on Friday from 4%, stock market filings showed on Monday.

The move fuels expectations Tchenguiz could seek to position himself as a white knight to any bid.

Sainsbury's fourth-quarter trading statement due on March 28 is expected to provide a watershed for any bid, with analysts forecasting a rise of 4 to 5.5% in like-for-like sales excluding gasoline.

Asda could present a strong case to the Competition Commission for a full offer for the company by arguing that an Asda-Sainsbury tie-up is the only way to create a real long-term competitor to Britain's largest retailer Tesco, Citigroup said in a research report last month.

It also suggested that Asda, along with other space-hungry retailers, would be a willing buyer of some of Sainsbury's stores if a private equity buyer decided to break up the company. Marks and Spencer, Britain's largest clothing retailer, this month said it reserved the right to launch a counterbid.

Asda, Britain's second-largest supermarket group, with a more than 16% share of the grocery market, lost out to Morrisons in a bid for supermarket group Safeway in 2004 and has since been looking for another opportunity.

Sainsbury pension trustees said on Friday the consortium could have to address a pension hole of as much as 3 billion pounds ($5.9 billion) to succeed in bidding for the company.