Qatari Group Boosts Sainsbury Stake

The pressure is building on Sainsbury to monetise its large property portfolio.

Mark Weber, CFA 18 June, 2007 | 11:03AM
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A Qatari investment group has increased its stake in supermarket chain J. Sainsbury from 17% to 25%, trumping the 18% held by the Sainsbury family. The purchase drove the supermarket's share price to 595p, a new high. Although the Qatari group hasn't officially stated its intentions, it seems like they will try to divest some or all of the supermarket's property holdings. The Qatari fund is run by property specialist Paul Taylor. He is also the former partner of Robert Tchenguiz, who owns 5% of the supermarket. The Sainsbury family recently blocked Tchenguiz's attempt to split the supermarket into a property company and a retail operation.

Monetising the value of property holdings has become a recurrent theme in the British retail industry. Many retailers' share prices have failed

to keep up with the rise in the value of their property portfolios. Supermarket giant Tesco has realised the value of its holdings by creating several property joint ventures. Home improvement retailer Kingfisher recently turned some of its B&Q properties into cash by entering into sale-leaseback agreements.

Sainsbury's board, however, has steadfastly refused to divest its freehold properties. Since the start of the year, the board has fought off two suitors interested in the firm's property portfolio. Robert Tchenguiz's attempt to split the company came on the heels of a collapsed private equity bid for the supermarket. The board and the Sainsbury family argue that the company needs to keep its freehold properties to remain successful. That position will be tough to maintain with close to one third of Sainsbury shares held by groups interested in divesting property.

Top 10 UK Fund Owners of J. Sainsbury, by Per Cent of Fund Assets
Fund Portfolio
Date
Number
of Shares
Per Cent
of Fund Assets
Aberdeen UK Opps 31/05/2007 300,000 2.25
Winterthur Aberdeen UK Gr 31/05/2007 1,037,000 2.25
Aberdeen UK Equity Income 31/05/2007 1,166,193 2.23
Aberdeen Ethical Engmnt UK 31/05/2007 47,000 2.23
Artemis UK Growth 30/04/2007 2,500,000 2.10
Aegon UK Opportunities 30/04/2007 194,300 2.08
AEGON UK Equity 30/04/2007 556,587 2.05
ML UK Special Situations 28/02/2007 2,000,000 1.84
ResolutionAsset Cartsn UK Opps 30/04/2007 294,500 1.82
Artemis Capital Fund 30/04/2007 2,972,242 1.63

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Mark Weber, CFA  Mark Weber, CFA, is a stock analyst with Morningstar.

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