The private equity consortium stalking UK retailer Sainsbury’s could be considering a plan to use part of the group’s property portfolio to resolve the pension deficit issue that threatens to sink a potential takeover bid.
Sainsbury’s trustees recently revealed that the retailer’s pension deficit currently totals GBP410m (US$804.24m). However, the trustees said that this could rise to GBP1bn if there were to be a change of circumstances, such as a private equity bid that might require a move to “more conservative” investment policies.
Sainsbury’s shares have dramatically increased in value since a private equity consortium consisting of CVC, Kohlberg Kravis Roberts (KKR), Blackstone and Texas Pacific Group, first signalled its interest in the UK’s third largest retailer at the beginning of February. However, the size of the retailer’s pension deficit has been viewed as a potential stumbling block for any takeover move.
According to a report in The Business, the CVC-led consortium is considering offering some of the company’s property assets, valued at GBP7.5bn, as security to the group’s pension trustees. However, a spokesperson for the private equity group told just-food today (30 March) that while the group is still evaluating the feasibility of a move on Sainsbury’s it is unwilling to make its position public.
“We are considering all eventualities and evaluating the pros and cons of a bid,” CVC said. “This process being what it is, we aren’t releasing any information until a decision has been reached.”