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LONDON - British retailer J. Sainsbury's shares plunged 20 per cent on Monday (UK time) when it became one of the largest buyout casualties of the credit crisis.
Qatari fund Delta Two ditched plans for a £10.6 billion ($29 billion) bid for Britain's third-largest supermarket group, blaming worsening credit markets and the cost of winning support from the firm's pension trustees for the failure.
The shock outcome is the biggest collapse of a transaction involving a British company due to the global credit market gyrations triggered by the crisis related to poor-quality US mortgage loans.
It follows confectioner Cadbury reneging on the sale of its North American drinks unit, and pub group Mitchells & Butlers delaying a property spin-off.
Odey Asset Management chief executive David Stewart said he had held a short position in Sainsbury's shares for some time believing the stock was overvalued.
"We felt a lot of things had got overextended in terms of share prices on the back of takeovers that presumably won't take place," Stewart said. Delta Two still owned 25 per cent of Sainsbury's and was likely to keep the stake, because the credit market conditions would make it difficult to find a sole buyer, a person familiar with the matter said.
The pullout marks the second failed bid for Sainsbury's in less than seven months. Private equity firm CVC Capital Partners abandoned a takeover attempt in April after opposition from the Sainsbury family, which owns about 18 per cent of the supermarket group.
Sainsbury shares closed down 20.7 per cent at 440 pence, its lowest level since February 2, the day the CVC-led consortium said it was considering making a bid for the retailer.
It brought Delta Two's investment to a loss of more than £570 million, the fund having bought most of its stake at around 575p a share.
Before Delta Two's pullout, Sainsbury shares were nearly two times dearer than the European retail industry average.
- Reuters
