Bestway Group Ltd., a British convenience store operator, bought a 3.45% stake in J Sainsbury Plc and said it may look to buy more in a move that will cause speculation about the future of the UK grocer.
Bestway said Friday it intends to hold the shares for investment purposes, but it sn't considering making an offer for Sainsbury, the UK's second largest grocer. The purchase of shares is equivalent to 193 million $239 million at Sainsbury's closing price on Thursday.
Sainsbury's stock rose more than 5% in early trading.
Clive Black, an analyst at Shore Capital, wrote in a note that the news may spark some chatter around Sainsbury and the wider sector with respect to corporate activity and equity values.
Bestway is one of the largest family-owned businesses in the UK with sales of around 4.5 billion and a pre-tax profit of nearly 400 million in the year to June 30. Bestway was founded in 1976 by Anwar Pervez 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.
The group is owned by the Pervez, Choudrey and Sheikh families. Some of the best known convenience retail brands in the UK are the Costcutter and Bargain Booze chains. It is also the largest independent wholesale operator in Britain and is closely linked to the country's grocery sector.
As the UK supermarket industry becomes more consolidated, takeover speculation has swirled around Sainsbury for some time. Last year, the 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 considering a merger with the UK arm of EG Group, a petrol filling and convenience business they also own.
Sainsbury s shareholder base has piqued interest for a long time as it has two large investors including the Czech billionaire Daniel Kretinsky's Vesa Equity Investment and the Qatar Investment Authority.
Charles Allen, a BI senior retail industry analyst, believes that Bestway is one of the key shareholders 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.
Bestway has been acquired in the past and bought Co-operative Group's pharmacy business in 2014 for 620 million dollars. The Well Pharmacy brand is now the largest independent chain, with 745 branches across the UK.
Sainsbury announced on Wednesday 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 that 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.
Read more: Rising Costs And Stiff Competition Cloud Outlook For Sainsbury
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