Bestway Group buys stake in J Sainsbury; says no offer made

LONDON: British convenience store operator Bestway Group Ltd. has bought a 3.45 percent stake in J Sainsbury Plc and said it may look to buy more in a move that will prompt speculation about the future of the UK grocer.

Bestway said on Friday it intends to hold the shares for investment purposes but added that it’s not considering making an offer for Sainsbury, the UK’s second largest grocer. The purchase of shares is equivalent in value to about £193 million ($239 million) at Sainsbury’s closing price on Thursday.

Sainsbury stock rose more than 5 percent in early trading.

“The news comes as a surprise to us and may spark some chatter around both Sainsbury and the wider sector with respect to corporate activity and equity values,” Clive Black, an analyst at house broker Shore Capital, wrote in a note.

Bestway is one of the largest family-owned businesses in the UK with sales of about £4.5 billion and a pre-tax profit of nearly £400 million in the year to June 30. Founded by Anwar Pervez in 1976, Bestway started off as a convenience store group but now has a range of multinational interests across the wholesale grocery, pharmacy, real estate, cement and banking sectors, employing 28,000 people globally.

Today the group is owned by the Pervez, Choudrey and Sheikh families. Some of Bestway’s best known convenience retail brands in the UK include the Costcutter and Bargain Booze chains. It’s also the largest independent wholesale operator in Britain and is closely linked to the country’s grocery sector.

Industry consolidation

Takeover speculation has swirled around Sainsbury for some time as the UK supermarket industry becomes increasingly consolidated. Last year US private equity firm Clayton, Dubilier & Rice completed the highly leveraged takeover of Wm Morrison Supermarkets Plc. The owners of Asda, the UK’s third-largest grocer, are also reported to be mulling a potential merger with the UK arm of EG Group, a petrol filling and convenience business they also own.

Sainsbury’s shareholder base has long piqued interest too as it has two large investors including the Qatar Investment Authority and Czech billionaire Daniel Kretinsky’s Vesa Equity Investment.

Bestway is now another significant shareholder in Sainsbury who believes that more value can be squeezed from the supermarket’s assets but the conglomerate may need to “unlock some previously unrecognized operational improvement to create value,” said Charles Allen, a BI senior retail industry analyst.

Bestway has been acquisitive in the past and in 2014 bought the Co-operative Group’s pharmacy business for £620 million. Its Well Pharmacy brand is now the largest independent chain, operating 745 branches across the UK.

Sainsbury recently announced that LloydsPharmacy had decided to close all counters in its stores. Independent retail analyst Maureen Hinton said in a tweet that Bestway’s Well Pharmacy chain could be an obvious replacement to fill the void left in 237 Sainsbury stores.

Sainsbury said in a statement it will engage with Bestway like any other shareholder. The grocer recently reported a solid Christmas period although higher food and payroll costs are squeezing its margins as it tries to hold down prices for cash-strapped shoppers.