Qataris ditch Sainsbury bid

Nobody likes Monday mornings, but if you happen to be a member of the Qatari government, you’ll be feeling the pain more than most. Its investment fund Delta Two has pulled out of talks to buy supermarket chain J Sainsbury after a three-month pursuit, leaving itself seriously out of pocket and with a big dent in its reputation.

Last Updated: 06 Nov 2012

In a statement today, Delta Two boss Paul Taylor said the extra cost of funding in the wake of the credit squeeze meant the deal ‘would not be in the best interest of stakeholders’.

Taylor argued that the extra £500m it would have needed from its backers to make the deal happen would have had a negative impact on returns.

But for an £11bn deal that already included nearly £5bn in equity, this seems like a relatively small shortfall to abandon a very long and very public pursuit. Taylor will argue that he is just showing good investment discipline – which is probably true – but it will inevitably affect the fund’s reputation for getting deals done.

To make matters worse, the supermarket’s share price promptly plunged about 20% - and as Sainsbury’s biggest shareholder, Delta Two promptly saw hundreds of millions of pounds wiped off the value of its holding.

The share price will undoubtedly rebound, at least to some extent – Sainsbury’s has had 11 consecutive quarters of sales growth, and most analysts seem to think that the supermarket will continue the recovery it has been enjoying under Justin King.

However, Delta Two’s reputation may take a little longer to recover.

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