Sainsbury (j) Share Discussion Threads

[arja] 25/8/2021 09:16

quite a pullback in SBRY and I wonder if it will gradually fall back to about 305 chart support level .

[spob] 25/8/2021 06:56

Trustees warn Morrisons takeover would ‘materially weaken’ pension schemes

Concern over level of debt involved with rival bids from CD&R and Fortress


Jonathan Eley and Josephine Cumbo August 24 2021

The trustees of Morrisons’ pension funds have warned that either of the takeover bids for the supermarket chain would “materially weaken” its retirement schemes.

Private equity firm Clayton, Dubilier and Rice and a rival consortium led by Fortress Investment Group have pledged to safeguard the retirement benefits of staff in the two defined-benefit schemes that Morrisons sponsors.

But trustees are concerned about the elevated levels of indebtedness that both proposals would entail and raised the prospect of regulatory intervention.

“An offer for Morrisons structured along the lines of the current offers would, if successful, materially weaken the existing sponsor covenant supporting the pension schemes, unless appropriate additional support for the schemes is provided,” said chair of trustees Steve Southern.

The trustees are concerned that either acquisition would increase the company’s finance costs, potentially reducing the scope for company contributions to the schemes, and that senior debt may also rank ahead of the pension funds in any insolvency.

At the end of its financial year in January, Morrisons had net debt of £3.2bn. But the CD&R offer for the group envisages an equity contribution of about £3.4bn, with the remainder of the £10.2bn total price tag financed by debt.

“We hope agreement can be reached as soon as possible on an additional security package that provides protection for members’ benefits,” said Southern.

The two schemes, one of which relates to Morrisons’ takeover of rival Safeway in 2004, are both in surplus on an ongoing funding basis, and benefit from security in the form of freehold properties held within a pension funding partnership structure.

However, the aim of the trustees has been to get the schemes to a funding level compatible with a buyout by an insurer, which would guarantee benefits and eliminate any reliance on the company. On this basis, the schemes have an aggregate deficit of £800m and would need additional security before a buyout could be contemplated.

The trustees have already held talks with Fortress, which is backed by Japan’s SoftBank and whose consortium includes Canadian pension fund CPPIB, a unit of Koch Industries and Singapore’s GIC wealth fund, about safeguarding pension funding. They have also held an initial meeting with CD&R.

But they warned that agreement on mitigation measures “should be settled with CD&R or Fortress prior to any shareholder meeting to consider any offer for Morrisons”.

Investors are due to vote on the CD&R offer of 285p a share, which is currently recommended by Morrisons’ board, in early October. However, it is possible that Fortress could table another offer or that the UK’s takeover regulator could order an auction process to decide the outcome.

New legislation, coming into force from October 1, will give The Pensions Regulator new powers to intervene if it is concerned that corporate actions could put members at risk of not getting the pensions they were promised.

The new powers will enable the regulator to pursue anyone who does something to prevent pension scheme members from receiving their benefits in full.

Anyone prosecuted for these offences faces up to seven years in prison and a potentially unlimited fine.

The powers were introduced following a pension scandal involving the high street retailer, BHS, which collapsed in 2016, a year after Sir Philip Green, the billionaire owner, sold the struggling business for £1. The failure of the retail giant left tens of thousands of members of the BHS pension scheme facing cuts of up to 10 per cent to their retirement income.

The Pensions Regulator said: “In our role to protect savers, we are working closely with the trustees of the Morrisons pension schemes and we note they are taking a robust position in terms of securing the best outcome for members in relation to the proposed transaction. This is in line with our expectation that trustees act as the first line of defence for members.”

CD&R and Fortress both said they had already held talks with the trustees and did not intend to change pension benefits. CD&R also said it accepted that trustees expected to hold talks with would-be owners about an “appropriate mitigation package” to give the schemes more security, and that it intended to “continue this dialogue”.

[leadersoffice] 24/8/2021 20:49

I never engage in shorting. I am a buyer and have accumulated over the years and continue to hold my positions in Sainsbury's. Yesterday I made purchases in M&S & Tesco and have been a long term investor in Morrison's. Don't underestimate consolidation in the food retail supermarkets. Just because there have been failed attempts at taking over Sainsbury's' in the past ... does not mean it won't happen in the future. Many British companies are undervalued presently FTSE companies having huge shorting positions. Given the environment we are in right now, one should be careful of continuing to hold such short positions... you never know who's the next candidate for a takeover.

[bluecash] 24/8/2021 20:01

But is he right about the shareprice falling further?

[careful] 24/8/2021 18:50

Yore gud at Inglish Dan, aint ya?

[careful] 24/8/2021 17:47

These press guys must make a fortune pumping and dumping.

First you take a huge position, or at least get someone to take one for you.
Second a couple of articles talking about a takeover rumour.
Third dump the lot after the rise.

[bluecash] 24/8/2021 17:00

You obviously didn't 'switch off'. Did you buy though?

[leadersoffice] 24/8/2021 16:55

When I read posts like you've written, I automatically switch off. Infact... id even go a step further and do the opposite and buy more shares in Sainsbury's. Your not some bloody oracle but your certainly one of those ghastly shorters I hope gets burnt to a crisp.

[danvandan] 24/8/2021 16:03

Anyone heeding my words yesterday afternoon and taking profits would be 5% better off now. NY Boy didn't answer ANY of the points I raised but just blustered a load of nonsense. There are many people like that on advfn, who like the sound of their own voice. Tomorrow will be like today here, another 5% down. The fake story placed in the press has worked, smart money has been made. Anyone hoping this will spike again will be disappointed. If you're ahead now, I suggest you take your profit and keep an eye out for the next opportunity.

[montyhedge] 24/8/2021 15:05

The old bid chestnut comes up every now and, smart money buys, get an article in the press, sell into mug buying, works every time.

[spob] 24/8/2021 14:01

If someone does buy this company

I hope they boot out all the directors on day 1


and then boot out all the staff in the Holborn head office

This company needs a fresh new start with a New Head Office and a New board of directors.


Time to get this company moving in the right direction for once and for all

[pjw956] 23/8/2021 22:07

Back in 2007.......there was a pension issue.....and not much has changed since....
...this is what stopped that takeover deal...

Shares in Sainsbury’s fell by up to 1.5 per cent, recovering to close down dp to 549dp yesterday, as investors feared the implications of a big shortfall in the company’s scheme should it be taken private could present a significant hurdle to a deal.

There are concerns a highly leveraged private equity owner, having borrowed large sums to finance a deal, might be unwilling or unable to make further contributions to the scheme. That could prompt the trustees to ask for a big upfront guarantee in the form of cash or assets.

Sainsbury’s, led by Justin King, has two final-salary schemes that have both been closed to new members for several years. They have a total of just over 86,000 members and, as of last October, a deficit of £477million.

That figure rises to about £1billion based on whether or not a buyout takes place, reflecting a move to an investment policy based on bonds, which have provided lower returns than equities. The £3billion figure is based on a worst-case scenario — whereby the company stops paying into the scheme and pensions have to be paid out for up to 60 years.

The consortium has met the trustees but it is understood they have so far not put forward concrete proposals. A source said; “The trustees don’t care who owns the business. The only thing they care about is who is going to pay the pensions in the next 60 years.”

[ny boy] 23/8/2021 18:32

DanVanDan
Member since: 06 Jan 2021

Totally clueless, the worry is too many newcomers in the market, remember the shoe shine boy giving out stock tips before the crash of ‘29

Tread carefully but certainly the supermarket sector is in play, there is a wall of very cheap money looking for cheap U.K. equities, that will keep the market busy but watch out for September/October a serious correction could well be brewing. Stock selection will be key

[chiefbrody] 23/8/2021 17:38

I don't know how many more shares are in issue now, or the debt levels compared to 2007, but i think its highly likely that a new bid wouldn't reach that level now.

[danvandan] 23/8/2021 17:23

I agree anhar. Still untrue bighead. People are always talking up bids. About 40 bids are in this year; an unusually large number, but still most rumours come to nothing.

If you're valuing sbry for its property, there are cheaper ways to buy property. And if you're wondering what retail property is worth, try selling a shopping mall. Personally, I doubt there'll be a bid for sbry. Why should there be? There's little or no profit in the business. The Argos takeover was a waste of money. Yet another expensive add-on that makes no difference to supermarket sales.

I reckon this is a short squeeze, caused by hot money which might well exit very fast after ramping a story successfully in the UK's wonderful free press.

[anhar] 23/8/2021 17:15

I've been following markets for many decades and it is certain that bid talk very rarely materialises into an actual bid. Even if you are correct about this year that is nothing in the long term of market experience.

I'm not saying SBRY can't be taken out, of course it can like any share, it's just that over time the ratio of actual bids to gossip is vanishingly low.

Not that I'm against a bid here, I have a sizeable holding in this share. Just that I've seen it all before, innumerable times in innumerable different shares.

[big7ime] 23/8/2021 17:13

This yr most the bid talk has come true anhar

[s34icknote] 23/8/2021 17:11

Last year !!

[s34icknote] 23/8/2021 17:11

Wow this has doubled of its March lows !!!

[anhar] 23/8/2021 17:07

imperial3: There is no smoke without fire.

As far as the stock market and bid rumours are concerned, that proverb is definitely untrue. Almost all bid talk comes to nothing. That doesn't mean it can't happen here, just that in the overwhelming majority of cases these rumours are entirely false so that no bid emerges.

[dipa11] 23/8/2021 17:04

Cvc capital has been bid for sainsbury 5.82 in 2007After 14 years what should be bidding price?

[big7ime] 23/8/2021 17:03

Ah ok well done.

Why do you think 10bn too much?