20th Sep 2007 07:01
Sainsbury(J) PLC20 September 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION INTO OR FROMAUSTRALIA, CANADA, JAPAN OR THE UNITED STATES 20 September 2007 STATEMENT BY DELTA (TWO) LIMITED ("DELTA TWO") AND J SAINSBURY PLC ("SAINSBURY'S" OR "THE COMPANY") REGARDING A POSSIBLE OFFER FOR SAINSBURY'S Delta Two and Sainsbury's are today jointly providing an update on theirdiscussions concerning the possibility of Delta Two making an offer to acquireall of the issued and to be issued ordinary share capital of Sainsbury's whichit does not already own, at a price of 600 pence in cash per ordinary share. Following extensive discussions between the parties concerning the key aspectsof Delta Two's proposal and, following the submission of a revised proposal byDelta Two, the Board of Sainsbury's has unanimously agreed that Delta Two mayundertake a limited period of confirmatory due diligence on the Company in orderto progress its proposal. There can, however, be no certainty that any offer forSainsbury's will be made. The Qatar Investment Authority ("QIA") is the ultimate parent of Delta Two,being the company through which the QIA holds its existing interests inSainsbury's. The key features of Delta Two's revised proposal are: - An offer price of 600 pence in cash per Sainsbury's share Delta Two has reconfirmed its proposed offer price of 600 pence per share incash. This offer price would represent a multiple of 40.8 times (1) theearnings per share of Sainsbury's for the fifty two weeks ended 24 March 2007.Sainsbury's shareholders would also be entitled to receive an interim dividendof 3.0 pence per share which the Board of Sainsbury's would intend to declare inrespect of the period ending 6 October 2007. - A £0.85 billion increase in offer funding by way of ordinary sharesand preference shares, which will result in a total of £4.85 billion in fundingby way of ordinary shares, preference shares and payment-in-kind notes No part of this funding would represent a liability of the existing Sainsbury'sgroup. The increase in funding by way of ordinary shares and preference shares,which are guaranteed by the State of Qatar, leads to a reduction in debt fundingprovided by third parties in comparison to Delta Two's original proposalannounced on 19 July 2007. - New commitment letters from Delta Two's financing banks in respectof debt facilities totalling £9.6 billion These facilities (provided by ABN Amro NV, Credit Suisse and Dresdner KleinwortLimited) together with the £4.85 billion of committed funding from ordinaryshares, preference shares and payment-in-kind notes would be used to fund theoffer, repay existing Sainsbury's debt and inter alia provide long termfinancing for the Sainsbury's group following an acquisition of Sainsbury's byDelta Two. - The appointment of a non-executive Chairman to the Board of Sainsbury's and enhanced reporting and disclosure standards Tony Campbell, former Deputy Chief Executive of ASDA Group plc ("ASDA"), wouldbecome non-executive Chairman of Sainsbury's following completion of any offerby Delta Two. Delta Two intends that Sainsbury's would adopt the guidance in theWalker Report relating to enhanced reporting and disclosure standards forprivately-owned companies. - Delta Two business plan and capital structure Prior to reaching agreement on a process for due diligence, Delta Two andSainsbury's held extensive discussions on Delta Two's proposed capital structureand its plans for the business, including the implications for stakeholders. Delta Two's business plan is focused on growth, envisaging £3.5 billion ofcapital investment over the next five years to fund new store expansion, thecontinued refurbishment of existing stores, further development of Sainsbury'snon-food offering and continued investment in infrastructure. Delta Two hasprovided assurances that Sainsbury's will have operational flexibility tocompete in order to maintain and enhance customer goodwill. The strongrelationships Sainsbury's has with its suppliers would be maintained, as wouldits support for the quality and diversity of food production in the UK. DeltaTwo shares Sainsbury's management's view that ownership of property is integralto the long-term success of the business. Accordingly, and in line withmanagement's current operational strategy, the retail business and Sainsbury'sproperty assets would remain under common ownership in the same corporate group.In summary, under Delta Two's ownership, Sainsbury's would see significantinvestment and further expansion and would remain a robust competitor in itsmarkets, even in challenging industry conditions. Delta Two and the QIA wouldexpect to manage the capital structure flexibly in response to opportunities andchallenges encountered by the business. In this regard, Delta Two and the QIAwill, where appropriate, support and develop the business through further equityinvestment. - Delta Two has a high regard for Sainsbury's management and employees Delta Two has a high regard for the management and employees of Sainsbury's andattaches considerable importance to retaining their skills and expertise for thebenefit of the business in the future. Delta Two intends to maintain theexisting cash benefits, and put in place new performance-based incentives formanagement and employees. In relation to the Executive Directors, details ofthese arrangements will not be proposed until such time as any offer becomeswholly unconditional. - Delta Two to work constructively with the trustees of Sainsbury'spension schemes Delta Two recognises the importance of ensuring that the Sainsbury's pensionschemes are appropriately funded, and intends to work constructively with theSainsbury's pension trustees to reach agreement on the appropriate level offunding for the schemes. Delta Two will approach the Sainsbury's pensiontrustees imminently to commence detailed discussions. - Delta Two and the QIA The QIA is the ultimate parent of Delta Two being the company through which theQIA holds its existing interests in Sainsbury's. The QIA was established inJune 2005 with the objective of developing, investing and managing Qatar'sreserve funds and other property assigned to it by Qatar's Supreme Council. Itis a Qatar government-controlled, non-corporate entity which invests in localand international markets as part of the Qatari government's strategy ofreducing the country's economic reliance on fossil fuels. His Excellency SheikhHamad Bin Jasim Bin Jabor Al-Thani, the Prime Minister of the State of Qatar, isthe Vice Chairman and CEO of the QIA. The QIA has given appropriate assurances to the Board of Sainsbury's concerningthe ultimate ownership and control of Delta Two, including the nature of therelationships between the QIA, Delta Two and Paul Taylor. Delta Two intendsthat Sainsbury's will adopt the guidance in the Walker Report relating toenhanced reporting and disclosure standards for privately-owned companies. Paul Taylor, Principal of Three Delta and Strategic Investment Adviser to DeltaTwo in relation to the proposal, said: "We have a high regard for the management and employees of Sainsbury's and weare supportive of their operational strategy, including plans for substantialinvestment in the Company. We are very pleased to have reached agreement withthe Board on a process for due diligence. This is an important next step in ourprogressing a possible offer for the Company." Sir Philip Hampton, Chairman of Sainsbury's, said: "We have held extensive discussions with Delta Two over a number of weeks andbelieve that their revised proposal is comprehensive and, if it results in anoffer, that offer would be recommendable to shareholders. The Board hasunanimously decided it is now appropriate to permit Delta Two to undertakeconfirmatory due diligence." No decision has been made regarding any possible offer and accordingly there canbe no certainty that any offer for Sainsbury's will be made. A furtherannouncement may be made as and when appropriate. Delta Two is being advised by Dresdner Kleinwort Limited and Credit SuisseSecurities (Europe) Limited. Sainsbury's is being advised by UBS InvestmentBank and Morgan Stanley & Co. Limited. Enquiries: Joint financial advisers to Delta (Two) Limited: Dresdner Kleinwort Limited Tel: +44 (0) 20 7623 8000John McIntyre Credit Suisse Securities (Europe) Limited Tel: +44 (0) 20 7888 8888David Livingstone Public relations adviser to Delta (Two) Limited:Financial Dynamics Tel: +44 (0) 20 7831 3113Giles SandersonJonathon Brill J Sainsbury plc:Elliot Jordan (Investor Relations) Tel: +44 (0) 20 7695 4931Pip Wood (Media) Tel: +44 (0) 20 7695 7295 Joint financial advisers and joint brokers to J Sainsbury plc: UBS Investment Bank Tel: +44 (0) 20 7567 8000Hew Glyn Davies Morgan Stanley & Co. Limited Tel: +44 (0) 20 7425 5000Gavin MacDonald Public relations adviser to J Sainsbury plc:Finsbury Tel: +44 (0) 20 7251 3801Mike SmithAlex Pettifer This announcement does not constitute, or form any part of, any offer forsecurities. Notes (1) Based on underlying basic earnings per share for Sainsbury's of 14.7pence per share as extracted from the annual report and accounts of Sainsbury'sfor the fifty two weeks ended 24 March 2007. Notes Tony Campbell Biography Tony Campbell, is one of the UK's most experienced retail business executiveswith over 20 years experience as a director of a FTSE company and a total of 35years experience in retailing. Starting as a trainee store manager, he workedfor Fine-Fare Supermarkets and later became Store Manager at Sainsbury's,progressing to Stores Director of their Savacentre hypermarket division. Tony Campbell joined ASDA in 1985 as Operations Director and was appointed tothe main board in 1987. He was one of the key executives responsible for theturnaround of ASDA in the 1990s, during which period he worked with Justin King,the current CEO of Sainsbury's, in a number of senior roles. In 1998 he wasappointed Deputy CEO, in which capacity he led the business alignment programmefollowing the acquisition of ASDA for £6.7 billion by Wal-Mart Stores, Inc. in1999. Since 2001 he has held a number of senior positions in the retail and leisuresectors including Chairman of The Spirit Group and Senior Non-Executive Directorof First Choice Holidays plc. He is currently Chairman of Hobbs Limited,Chairman of T M Lewin and Sons Ltd. and Chairman of The White Company. Dresdner Kleinwort Limited and Credit Suisse Securities (Europe) Limited, whoare authorised and regulated in the United Kingdom by the Financial ServicesAuthority, are acting as joint financial advisers to Delta Two and for no-oneelse in connection with the contents of this announcement and will not beresponsible to anyone other than Delta Two for providing the protectionsafforded to customers of Dresdner Kleinwort Limited and Credit Suisse Securities(Europe) Limited, or for providing advice in relation to the contents of thisannouncement or any matters referred to herein. UBS Investment Bank and Morgan Stanley & Co. Limited are acting as jointfinancial advisers and joint brokers to Sainsbury's, and no one else inconnection with the potential offer and the contents of this announcement andwill not be responsible to anyone other than Sainsbury's for providing theprotections afforded to the clients of UBS Investment Bank and Morgan Stanley &Co. Limited, nor for providing advice in relation to the potential offer, thecontents of this announcement or any other matter referred to herein. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the Takeover Code (the "Code"), if anyperson is, or becomes, "interested" (directly or indirectly) in 1% or more ofany class of "relevant securities" of Sainsbury's, all "dealings" in any"relevant " securities" of that company (including by means of an option inrespect of, or a derivative referenced to, any such "relevant securities") mustbe publicly disclosed by no later than 3.30pm (London time) on the Londonbusiness day following the date of the relevant transaction. This requirementwill continue until the date on which the offer becomes, or is declared,unconditional as to acceptances, lapses or is otherwise withdrawn or on whichthe "offer period" otherwise ends. If two or more persons act together pursuantto an agreement or understanding, whether formal or informal, to acquire an"interest" in "relevant securities" of Sainsbury's, they will be deemed to be asingle person for the purpose of Rule 8.3. Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevantsecurities" of Sainsbury's by Delta (Two) Limited, the Qatar InvestmentAuthority, or Sainsbury's, or by any of their respective "associates", must bedisclosed by no later than 12.00 noon (London time) on the London business dayfollowing the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue can be found on the Takeover Panel's website atwww.thetakeoverpanel.org.uk . "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the Code, which can also be found on thePanel's website. If you are in any doubt as to whether or not you are requiredto disclose a "dealing" under Rule 8, you should consult the Panel. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Sainsbury's