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Would've expected a further fall back... More sells than buys atm.
# Trades 824
Vol. Sold 573,083
Sold Value £1,836,139.03
Vol. Bought 318,695
Bought Value £1,021,074.94
Chart look..at 378 428 478 the positions on the chart are interesting....todays low at this point 318....and possibly 298... It held for ages around 278 level as well....something on the cards for sure ..time to hold ones convictions and stay long and strong
428
Only if you are day trading, which nobody in their right mind would do.
Plenty would have been caught out today.
LONDON (Reuters) - A takeover of Morrisons by either of its two suitors could "materially weaken" the security of the supermarket's pension schemes if no additional protection were agreed, the trustees said in a letter to the company published on Tuesday.
The British retailer is at the heart of a $9.5 billion bidding war between U.S. private equity groups Clayton, Dubilier & Rice (CD&R) and a consortium led by SoftBank owned Fortress Investment Group.
Last week it backed an offer from CD&R, although its shares jumped above the 285-pence-a-share bid, indicating the battle could have further to run.
The trustees of the retailer's two pension schemes said that whilst the plans were currently in surplus, they remained dependent on the backing of Morrisons.
They said that support could be weakened by a private equity buyer, for example by a new owner securing additional debt on the supermarket's assets, the related increased debt service burden and possible refinancing and restructuring.
Trustees chair Steve Southern said: "An offer for Morrisons structured along the lines of the current offers would, if successful, materially weaken the existing sponsor covenant supporting the pension schemes, unless appropriate additional support for the schemes is provided.
"We hope agreement can be reached as soon as possible on an additional security package that provides protection for members' benefits."
Morrisons said it placed significant emphasis on the responsibilities of an owner, including towards its pensions. It said it would work with all parties to reach an agreement as soon as possible.
Back in 2007.......there was a pension issue.....and not much has changed since.... ...this is what stopped that takeover deal... Shares in Sainsbury’s fell by up to 1.5 per cent, recovering to close down dp to 549dp yesterday, as investors feared the implications of a big shortfall in the company’s scheme should it be taken private could present a significant hurdle to a deal. There are concerns a highly leveraged private equity owner, having borrowed large sums to finance a deal, might be unwilling or unable to make further contributions to the scheme. That could prompt the trustees to ask for a big upfront guarantee in the form of cash or assets. Sainsbury’s, led by Justin King, has two final-salary schemes that have both been closed to new members for several years. They have a total of just over 86,000 members and, as of last October, a deficit of £477million. That figure rises to about £1billion based on whether or not a buyout takes place, reflecting a move to an investment policy based on bonds, which have provided lower returns than equities. The £3billion figure is based on a worst-case scenario — whereby the company stops paying into the scheme and pensions have to be paid out for up to 60 years. The consortium has met the trustees but it is understood they have so far not put forward concrete proposals. A source said; “The trustees don’t care who owns the business. The only thing they care about is who is going to pay the pensions in the next 60 years.”
which is up 4.1% today, after yesterdays more than 10% rise. Hmm....... maybe they are!!!! LOL!
If you look at the nature of the takeovers, essentially it boils down to food and war. In this era, that makes total sense.
Text Content No. 3
Despite all the challenges, Sainsbury’s is strategically better positioned than Morrisons and Asda, with a stronger convenience presence, stores weighted to more affluent areas of the UK, a fast-growing online business and a formidable non-food offering.
And as Clive Black notes, whether The Sunday Times story proves to be on the money or wide of the mark, the guns of the world’s biggest asset managers will remain trained on UK grocers for the foreseeable future.
“If Apollo does not participate in Morrisons’ future, then we cannot discount that the private equity group nor other mega-finance houses will consider looking at Sainsbury’s,” he says.
“Accordingly, expect real and made-up noise to continue.”
Text Content No. 2
Massive captive demand throughout the Covid pandemic has driven ever-higher numbers through the tills of all the grocers, as well as dramatically changing consumer habits and finally transforming the costly online model into a money maker.
It also helps Aldi and Lidl have lost a little of their potency as the discounter market starts to mature.
And then there is the lucrative potential tied up in the large property estates just waiting to be unlocked by crafty leveraged buyout merchants.
Not to mention the long-overlooked fact these businesses are reliable cash cows throwing off millions of pounds every year.
Andrew Porteous of HSBC estimates Morrisons has £400m of free cashflow annually, while Sainsbury’s and Tesco should be aiming towards £500m and £2bn respectively.
A recent analysis by The Grocer, taking a deep dive into a report by cashflow analytics specialist Quest on which UK stocks are vulnerable to takeovers, found Sainsbury’s to be the most attractive name in food retail. The division of Canaccord Genuity argues stocks with a leveraged buyout free cash yield higher than 10% are attractive to a PE buyer. Sainsbury’s sits on 15.3%. Although this would come down with any bid made at a premium to the share price.
Today’s share price bonanza has already lifted Sainsbury’s market cap from £6.9bn to just shy of £8bn.
The stock is 86% higher than where it sat pre-pandemic, given a boost by Czech billionaire Daniel Kretinsky building up a sizeable position. Kretinsky and the Qatar Investment Authority, which is the biggest Sainsbury’s backer, have a combined shareholding of about 25%, making them kingmakers in any potential deal.
That in itself raises difficulties for any potential buyer, with shareholders and the board likely to expect any bids to come with a fat premium attached. CD&R’s £7bn offer for Morrisons represents a 60% mark-up on the share price back in June before the bidding war started.
Any premium of 60% to the currently inflated share price at Sainsbury’s is improbable, but even when applied to June’s levels of around 250p it gives a rather full number of somewhere close to 400p per share, and a valuation touching £9bn.
It’s not the only hurdle.
Sainsbury’s freehold portfolio is way below that of Morrisons and Asda, although still an attractive 50% to 60% of stores.
And Argos complicates matters, given an ongoing expensive integration programme whose fruits are hard to properly identify yet in the group performance. It also means Sainsbury’s is out of reach of strategic buyers such as Amazon given the obvious competition issues.
There are also questions worth asking about whether another of Britain’s biggest supermarkets falling into the hands of an overseas buyout firm represents any risk to the country’s food security.
Text Content No.1
So much for the usual slow trickle of hard news during the ‘silly season’ of summer. Fresh off the heels of a £7bn Sir Terry Leahy-backed offer from CD&R for Morrisons on Friday, speculation is now swirling around the future of Sainsbury’s.
A story in The Sunday Times hinting that buyout giant Apollo Global Management is lining up a bid for Sainsbury’s sent investors into a buying frenzy today. Shares soared 15.3% higher to 339.8p – approaching highs not seen since February 2014.
But while the market has certainly reacted wildly, there seems to be little in the way of substance to the report just yet.
Despite an eye-catching headline and intro that claimed “private equity giants are circling Sainsbury’s with a view to possibly launching bids of more than £7bn”, there aren’t any hard facts to cling onto in the body of the story. It turns out any interest from Apollo in Sainsbury’s is “understood to be exploratory”.
Even The ST’s sister paper, The Times, appeared to pour cold water on the news today, reporting sources insist Apollo is not looking at Sainsbury’s, hasn’t appointed advisors and has not held talks with the supermarket. On top of that, Apollo’s possible involvement with the Fortress consortium’s attempt to beat CD&R to the Morrisons prize would also rule it out of a tilt at Sainsbury’s.
And the fact Sainsbury’s hasn’t even bothered to release a comment to the London Stock Exchange tells its own story.
Shore Capital analyst Clive Black was withering in his assessment of the speculation in a note to the broker’s client this morning. He called the story “sensationalist” and “shallow” while also pointing out the paper effectively rehashed what has been a widely rumoured since Apollo lost out to TDR and the Issa brothers in the race for Asda last year.
Read more:
Sainsbury’s shares rocket on takeover speculation
Ex-Tesco CEO Terry Leahy outlines CD&R’s case for buying £7bn Morrisons
Why private equity wants to take UK food and drink assets off the shelf
Morrisons faces break-up risk in private equity takeover, analysts warn
However, there is no smoke without fire, and it’s not to say The Sunday Times is wrong.
Even if Apollo doesn’t end up tabling a bid for Sainsbury’s, there is a long line of other potential suitors – from Lone Star, CVC Partners, Blackstone and KKR to Fortress and other consortia of investors – with mountains of dry powder and supermarket assets on the shopping list.
Today’s share price rise at Sainsbury’s highlights the market is now alive to the fact that even the very biggest businesses are in play – including Tesco, with its market cap scraping against the £20bn mark. Indeed, Tesco was carried higher today as well, with shares up by more than 2% to 252.3p.
Shore Cap’s Black doubled down on his prediction there will be no listed UK supermarkets in due course.
So what’s behind this sudden influx of interest in a sector much underappreciated by both the stock
I was asking yesterday if there were any substance to the rumours.. It appears not....
https://www.thegrocer.co.uk/the-grocer-blog-daily-bread/apollos-bid-for-sainsburys-may-be-speculation-but-uk-grocers-remain-attractive-investments/659174.article
There is always a possibility that the rumour is not correct, or probably more likely they decide not to bid, or at least at a level that justifies the price movement. However, based on Morrison's it appears that multiple PE firms are at least looking at the UK Supermarket sector as an area where there is value to be had. Therefore I highly doubt that even is Apollo doesn't bid that the rumours of a possible takeover will go away.
The share price however yesterday reached £7.9bn which is significantly above the £7bn that Apollo was rumoured to be bidding. Now maybe that was just their starting bid and potentially we could have a bidding war with other players. But equally Apollo may decide that it was only worth their while at £7bn and will walk away. My point is that the share price already reflects a huge takeover premium (probably at least 100p of the current shareprice is due to it). Therefore don't expect another 30-40% premium on any bid, probably 10% is more likely.
Do not understand your logic on going short. You gain little but if bid arrives you loose tons. There are also high percentage of shorts in this stock and should keep the price prepped up. All IMHO-DYOR
pyueck.You are wrong.By closing Argos stores they were able to bring the business into the Sainsburys stores.I was saying that they did not do a particularly good job in doing this ,however by doing what the have they have reduced the cost base of the business thus being able to increase profits,however as a born and bred retailer I would have done a better job but not to late to make the changes.Argos was never going to go bust and I have followed the company since the week they fist opened.When Sainsvbury bought them the then chairman was the same man who was FD of Gus who bought them in the nineties.He knew what a bargain he was getting
It was a crazy decision, the idea that Sainsbury's poses the biggest competition risk in the era of Amazon, total joke of a decision. Actually was never convinced though that the deal was good for Sainsbury's shareholders, the deal valued ASDA at 300m more than it was sold to PE for and Walmart would have owned 42% of enlarged group and got over £2bn. ASDA is a tired brand.
It's a shame this share looks like it will likely fall to PE, the market has undervalued this for years. Management haven't helped by focusing enough on shareholder value.
Absolutely. Especially how now ASDA has fallen into the hands of yet another of these raids on British companies. Yes, I know it was owned by Walmart at the time but it was once a British company.
Argos had 700 million in cash, 1.5 billion in inventories or stock & a sizable loan book. Also included was the habitat brand. Always thought it remarkable how little Sainsbury paid for them. Just a pity the regulator blocked Sainsburys proposed Asda purchase a short time after. Three wonderful British companies will now be at the behest of dubious owners
Wasn’t too far off!
How did they get a bargain with Argos, would have been bust in a couple of years? They have hugely written down the investment and spent a fortune shutting down the shops for them. Would have been cheaper to create their own brand or better still buy the bits they wanted from the administrator.
Bought my first lot at 370p years ago and bunged them in the bottom drawer when they just spiralled downwards. Have been adding occasionally over last 18 months and got my average down to 250p. More than happy to see this sp. Patience has payed off eventually!
At least 500 .....360 no way..Warren Buffet quote "The stock market is mechanism to take money from the impatient and give it to the patient"...
I'm out. 15% is fine by me. If it's all just market noise, it'll come back down. But who knows, no one can predict the market.
3/8/21 Price 288. ..this is going to rocket...how spot on was I then....:o)