Sainsburys share price is higher after Bestway Group announced it had taken a 3.45% stake in the business and suggested it could take a larger stake.
Bestway Group is a multinational conglomerate which owns a range of businesses from wholesale, construction and banking, and which owns Costcutter today, and took over Conviviality in 2018.
Today’s announcement puts Bestway in the company of the likes of the Qatar Investment Authority as well as Daniel Kretinsky’s Vesa Investment fund, prompting speculation as to the motives behind the move, although Bestway have indicated that they have no intention of making a bid for the supermarket at this time.
Understandably this has prompted the inevitable speculation that Bestway might have larger designs on the UK’s second biggest supermarket, and what the future might hold for it going forward.
Takeover speculation is not new to Sainsbury’s management, we got similar speculation when Vesa took a large stake in the business a few years ago, while Sainsbury’s itself failed in its bid to acquire Asda, a move that was blocked by the Competition and Markets Authority.
Sainsbury’s shares also briefly spiked up to multi-year highs in 2021 on speculation that private equity group Apollo might be interested when it became apparent their ambitions on Morrison might be thwarted.
While concerns about a takeover might have some merit one only has to look across the High Street at what’s happened with Morrisons and Asda to realise how any bid, if it were to happen, might end up becoming a very expensive proposition, in what is an incredibly competitive marketplace.
Bestway would also have the not inconsiderable task of convincing Sainsbury’s two largest shareholders, the Qataris and Vesa that they have a credible plan to take the business forward.
That said Bestway’s position as a wholesaler could offer synergies for Sainsbury in any future relationship given that Tesco already owns Booker.
Earlier this month Sainsbury reported that Q3 sales rose by 5.2%, with grocery seeing a rise of 5.6%.
Christmas grocery sales saw an acceleration to 7.1%. On a like for like quarterly basis sales rose by 5.9%, with the Argos business generating a decent uplift as shoppers eschewed the flakiness of a strike-ridden Royal Mail service, by doing their grocery and Christmas shopping all at once.
This outperformance is expected to deliver full year underlying profit before tax at the upper end of the guidance range of £630m to £690m, despite concerns over price and margin pressures, which continue to act as headwinds.
Sainsburys shares are up over 15% year to date.
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