TPG joins Sainsbury’s buy-out consortium

Texas Pacific Group (TPG) has joined the CVC-led team that is working on an £11bn buy-out of J Sainsbury, silencing rumours that the firm was assembling a rival consortium. The US buy-out firm, which worked with CVC on the 2003 acquisition of Debenhams, has joined CVC, TPG and partners Kohlberg Kravis Roberts and Blackstone in what would be Europe’s largest leveraged buy-out. TPG was thought to be forming a rival consortium said to have included Bain Capital, Permira and Cinven. It was reported in the Financial Times that Sir Philip Hampton, Sainsbury chairman, has struck a deal with chief executive Justin King that would allow him to remain on the board if a bid is tabled for the retailer, on the provision that King does not have contact with any potential bidders. It is thought King will be retained as chief executive by the consortium, which would raise conflicts of interest if he agreed to work for them. Yesterday property agents began their annual valuation of Sainsbury’s estate which could prove crucial to the chain if and when the company mounts a defence against the consortium. The current value of Sainsbury’s freehold estate is thought to be around £7.5bn close to its market capitalisation of £8.8bn. If Sainsbury’s can show that its estate is worth between £7bn and £8bn it may persuade shareholders that a bid of £11bn is too low. Sainsbury’s vast land bank, which consists of 769 supermarkets in Britain’s tightly controlled out-of-town sector, is extremely valuable and could be maximised by introducing mixed-use and residential developments. It is thought the private equity bidders, if successful, would be keen to sell non-food lines to improve profit margins. Analysts have cast doubt on the consortium’s chances as Sainsbury’s shares continued their upward rally after hitting eight-year highs last week.