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TPG Mulls Joining CVC to Eye Sainsbury

Private equity firm Texas Pacific Group is in talks to enter a consortium led by CVC that is mulling a multi-billion-pound offer for British supermarket group J. Sainsbury, a person familiar with the matter said on Wednesday following media reports.

The Financial Times had reported on Wednesday that TPG, which sources had said was previously considering setting up a rival consortium, had already joined the CVC team. "TPG is in talks to enter with CVC," the person familiar with the matter said, adding those talks were ongoing.

Another source familiar with the matter also said that Goldman Sachs,the U.S. investment bank advising the CVC consortium, has not ruled out taking an equity stake in the consortium. The Times had earlier reported that Goldman was poised to join the buyout team.
CVC, with Kohlberg Kravis Roberts and Blackstone, said on Friday they were considering a bid for Britain's third-biggest supermarket owner in what would be Europe's largest leveraged buyout at over 10 billion pounds.

TPG, however, had held early talks with British counterpart Cinven to contemplate a separate bid for Sainsbury, people familiar with the situation said on Tuesday. Bain Capital could also take part, one of the sources said.

The Times, citing unnamed sources close to the matter, said CVC, KKR and Blackstone would take the lead in any deal, while Goldman Sachs would pay a smaller chunk of an estimated 3 billion pound ($5.9 billion) equity cheque. A comment was not immediately available from Sainsbury. The group has been keen to stress it is business as usual.However, a person close to the company did not rule out Sainsbury having made informal contact with the private equity groups. They are reported to be keen to retain Sainsbury Chief Executive Justin King should they succeed.


That person also confirmed media reports Sainsbury Chairman Philip Hampton had struck a deal with King allowing him to remain on the board should a bid be tabled, on the provision King does not have contact with the bidders.

Sainsbury shares remained at eight-year highs on Wednesday, trading up 0.2% at 517-1/4 pence per share and slightly outperforming a 0.4% fall in the DJ Stoxx index of European retailers. It trades at 36 times estimated 2007 earnings, compared with 19.7 times for
British supermarket leader Tesco and 17.8 times for the DJ Stoxx index of European retailers.

Sainsbury credit default also pushed wider to 103 bps from 98 bps late Tuesday, suggesting investors are more inclined to believe an offer will be made.