27th Jan 2023 10:35
(Alliance News) - Investors pushed J Sainsbury PLC to the top of the FTSE 100 index on Friday morning, after Bestway Group Ltd said it has bought or agreed to buy a 3.5% stake in the supermarket group.
Bestway said it bought 80.8 million Sainsbury's shares, a 3.45% holding, for an undisclosed sum.
Bestway is a London-based conglomerate, with operations across the UK, Pakistan and the Middle East. It was first established as a chain of convenience stores in 1963, but now has interests across the wholesale, pharmacy, real estate, cement and banking sectors.
Sainsbury's was up 4.4% at 250.00 pence early Friday in London following the announcement, making it London's best performer in early trade. However, in the past 12 months, the stock has shed 16%.
"Shares in Sainsbury's are trading at the top of the FTSE 100 following the Bestway stake build, which represents a vote of confidence in the British supermarket. The stock has had a strong start to the year after a tough 2022 with gains accelerating today," said interactive investor Head of Investment Victoria Scholar.
"Between August 2021 and October 2022, shares in Sainsbury's suffered a difficult slide, shedding around 45% of their stock market value. But since the lows, the supermarket has been regaining ground. Perhaps Bestway wanted to make the most of its relatively depressed share price before the stock regains further ground," Scholar added.
John Moore, senior investment manager at RBC Brewin Dolphin, agreed with Scholar. Moore said: "Bestway buying around a 5% stake in Sainsbury’s is another indicator that UK shares are cheap – particularly in the retail sector, which has somewhat of a dark cloud hanging over it."
Bestway Group said it intends to hold its shares in Sainsbury's for investment purposes and will support the executive management team.
It added that it may look to make further purchases in the future, but confirmed that it is not considering a takeover offer for Sainsbury's.
"Under UK Takeover Panel rules, in isolation Bestway cannot now make a bid for Sainsbury's for six months although if another offer came in for the company, then that position would change. Whether or not Bestway has the aspirations or the resources to do so remains to be seen, this is a pre-cursor to greater ownership aspirations or a route to try and collaborate with Sainsbury from a trading perspective remains to be seen. As a notable shareholder, we would expect Sainsbury to engage with Bestway as it does with all other investors," said Shore Capital's Clive Black & Darren Shirley.
"The particularly distinctive element of the announcement is the rather unusual statement from the Bestway that it wants to buy more Sainsbury shares and who to sell them through; the broker Redburn, which, of course, is owned by Rothschilds. Such an advertisement is likely to help the return on their initial investment for Bestway but mean that any future purchase is at a higher price, an unusual approach, but no doubt Rothschilds know best…"
The supermarket chain noted the announcement and said it will "engage" with Bestway "in line with our normal interactions with shareholders".
Scholer said: "In February 2021, Bestway completed its acquisition of Costcutter Supermarkets, highlighting the wholesaler’s desire to expand in retail through vertical integration, which helped support its buying power and attracted additional retail sales. The purchase of Sainsbury's share today adds to its retail exposure.
"The Tesco, Booker deal in 2018 is another example of vertical integration between wholesaler and supermarket, helping Tesco to achieve better pricing and product availability."
Back in 2018, Tesco PLC completed its GBP3.7 billion acquisition of wholesaler Booker Group PLC. At the time, the move was expected to bring significant cost savings to the UK's biggest supermarket chain. Booker supplied to the Budgens and Londis branded chain of convenience stores and owned Makro cash and carry stores.
Tesco shareholders voted 85% in favour of the acquisition, with 15% against.
By Sophie Rose, Alliance News reporter
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