Connect with us

Published

on

J Sainsbury, Britain’s second-biggest supermarket chain, is in advanced talks to sell its banking arm nearly a year after kicking off an auction of the division.

Sky News has learnt that the grocer is nearing an agreement to sell Sainsbury’s Bank to Centerbridge Partners, a US-based private equity firm.

The discussions are said to be within weeks of a potential agreement although they could still fall apart, a person close to Sainsbury’s said this weekend.

One analyst suggested that the purchase price was likely to be in the region of £200m.

Sainsbury’s Bank has around two million customers, offering products including home insurance and credit cards.

It pulled out of the mortgage market in 2019, reflecting the intense price competition in the sector as a protracted period of ultra-low interest rates hurts the profitability of smaller lenders.

Centerbridge is an experienced investor in the banking sector, with interests in Europe and North America.

More on Sainsburys

It previously backed Aldermore, the mid-sized lender, and was part of a consortium in 2015 which tried to acquire Williams & Glyn, a branch network that Royal Bank of Scotland – now NatWest Group – was ordered to sell under European state aid rules.

That deal failed to reach a conclusion because of technology problems that were plaguing RBS.

The Williams & Glyn business was being run by Jim Brown, a highly regarded executive who is now CEO of Sainsbury’s Bank.

Centerbridge is expected to use the purchase of Sainsbury’s Bank as a platform to buy other banking operations in the UK.

Under their deal, the private equity firm would acquire the business outright and use the Sainsbury’s brand under a licensing agreement with the supermarket chain.

Grocers’ foray into the banking sector over the last 25 years has met with little success despite the natural advantage of their enormous branch networks in the form of their stores.

Tesco Bank has sold its mortgage book and recently announced that it was pulling out of the current account market.

Meanwhile, Sainsbury’s has said it will not inject further capital into its banking arm.

Sainsbury’s took full control of the division in 2013, when it paid £260m to buy a 50% shareholding from joint venture partner Lloyds Banking Group.

The grocer launched its financial services business in 1997, with the promise of targeting customers through data gleaned from customer loyalty schemes stoking expectations that it could become a major profit engine for the group.

Despite taking full ownership of the Nectar loyalty programme, however, that potential has never been fully realised.

Sainsbury’s also owns the Argos Financial Services business following its takeover of the general merchandise retailer in 2016.

The company said little about the fate of the bank at a capital markets day in April, but has set a target of doubling underlying pre-tax profit and returning cash to the parent company by 2025.

News of the talks between Sainsbury’s and Centerbridge follows a week of frenzied speculation about the grocer’s future ownership.

Last weekend, The Sunday Times reported that private equity firms including Apollo Global Management were circling the supermarket chain with a view to launching a £7bn takeover bid.

The report sent Sainsbury’s shares soaring to a seven-year high, although they subsequently gave up much of those gains in the absence of any formal confirmation.

Apollo was one of the unsuccessful bidders for Asda last year, losing out to an offer from TDR Capital and Mohsin and Zuber Issa, the petrol station tycoons.

It has since entered talks about joining a consortium led by Fortress Investment Group, which is vying to acquire Wm Morrison, the UK’s fourth-biggest food retailer.

Fortress’s bid currently trails a 285p-a-share offer from Clayton Dubilier & Rice – whose interest in buying Morrisons was revealed by Sky News in June.

The flurry of corporate activity in the grocery retailing industry comes during a period in which a significant number of London-listed companies have been bid for in sensitive sectors including defence and healthcare.

Sainsbury’s, which is being advised on the bank talks by UBS, and Centerbridge both declined to comment.

Continue Reading

Business

Barclays fined £40m over ‘reckless’ financial crisis capital raising

Published

on

By

Barclays fined £40m over 'reckless' financial crisis capital raising

Barclays has been fined £40m over capital raising that averted its need for taxpayer aid during the 2008 financial crisis.

The Financial Conduct Authority (FCA) found that the bank should have disclosed more details to the stock market about the £11.8bn in funding, from Qatari and other sovereign investors, that it had previously described as “reckless” and lacking integrity.

The penalty followed a protracted investigation that began in 2013 but was held up by criminal proceedings brought by the Serious Fraud Office that led to the acquittal of all defendants charged, including Barclays.

A decision by the bank not to refer the FCA’s enforcement case to an Upper Tribunal meant that the watchdog’s planned fine could be imposed.

Its regulatory action concerned Barclays’ navigation of the events of 2008 when the-then Labour government took huge stakes in major lenders, including Lloyds and RBS – now NatWest – to prevent a collapse of the banking system.

The FCA said of its action: “The events in 2008 were of national importance as banks sought emergency recapitalisation.

“The FCA has a primary objective to ensure market integrity. Banks should treat their obligations to the market and shareholders seriously.”

More from Money

Barclays was yet to comment.

This breaking news story is being updated and more details will be published shortly.

Please refresh the page for the fullest version.

You can receive Breaking News alerts on a smartphone or tablet via the Sky News App. You can also follow @SkyNews on X or subscribe to our YouTube channel to keep up with the latest news.

Continue Reading

Business

‘When you hit profits, you hit growth’: Businesses criticise biggest budget tax increase in decades

Published

on

By

'When you hit profits, you hit growth': Businesses criticise biggest budget tax increase in decades

Tax rises announced during the recent budget will hit businesses rather than encourage growth, the head of one of the UK’s most prominent business groups will warn on Monday.

The Confederation of British Industry (CBI) has joined a choir of voices opposing Chancellor Rachel Reeves’s fiscal measures, which the Labour Party claims are needed to plug a £22bn “black hole” left by 14 years of Tory government.

Labour put growth at the heart of their campaigning during the last general election, but business believe the £40bn tax rises announced last month – the largest such increase at a budget since John Major’s government in 1993 – will stifle investment.

Rain Newton-Smith, who heads the CBI, is expected to say at the group’s annual conference in London that “too many businesses are having to compromise on their plans for growth”.

She will say: “Across the board, in so many sectors, margins are being squeezed and profits are being hit by a tough trading environment that just got tougher.

“And here’s the rub, profits aren’t just extra money for companies to stuff in a pillowcase. Profits are investment.”

Ms Newton-Smith will add: “When you hit profits, you hit competitiveness, you hit investment, you hit growth.”

The Office for Budget Responsibility (OBR), which monitors the government’s spending plans and performance, has previously said most of the burden from the tax increase will be passed on to workers through lower wages, and consumers through higher prices.

Last week, dozens of retail bosses signed a letter to the chancellor warning of dire consequences for the economy and jobs if she pushes ahead with budget plans.

Read more from Sky News:
How much does it cost to freeze your eggs and can it go wrong?

Storm Bert: Father rescues son from sinking car

Up to 79 signatories joined British Retail Consortium’s (BRC’s) scathing response to the fiscal announcement, which claimed Labour’s tax rises would increase their costs by £7bn next year alone.

It warned that higher costs, from measures such as higher employer National Insurance contributions and National Living Wage increases next year, would be passed on to shoppers and hit employment and investment.

The letter, backed by the UK boss of the country’s largest retailer Tesco, said: “The sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”

Please use Chrome browser for a more accessible video player

From October: ‘Raising taxes was not an easy decision’

‘Businesses will now have to make a choice’

A few days after the budget, Chancellor Reeves admitted she was “wrong” to say higher taxes were not needed during the election campaign – as she warned businesses may have to make less money or pay staff less to cover a tax increase.

But she claimed the previous government had “hid” the “huge black hole” in finances and she only discovered the extent of it once her party was voted in.

She told Sky News’ Sunday Morning With Trevor Phillips: “Yes, businesses will now have to make a choice, whether they will absorb that through efficiency and productivity gains, whether it will be through lower profits or perhaps through lower wage growth.”

Continue Reading

Business

ITV back in spotlight as suitors screen potential bids

Published

on

By

ITV back in spotlight as suitors screen potential bids

Potential suitors have again begun circling ITV, Britain’s biggest terrestrial commercial broadcaster, after a prolonged period of share price weakness and renewed questions about its long-term strategic destiny.

Sky News has learnt that a number of possible bidders for parts or all of the company, whose biggest shows include Love Island, have in recent weeks held early-stage discussions about teaming up to pursue a potential transaction.

TV industry sources said this weekend that CVC Capital Partners and a major European broadcaster – thought to be France’s Groupe TF1 – were among those which had been starting to study the merits of a potential offer.

The sources added that RedBird Capital-owned All3Media and Mediawan, which is backed by the private equity giant KKR, were also on the list of potential suitors for the ITV Studios production arm.

One cautioned this weekend that none of the work on potential bids was at a sufficiently advanced stage to require disclosure under the UK’s stock market disclosure rules, and suggested that ITV’s board – chaired by Andrew Cosslett – had not received any recent unsolicited approaches.

That meant that the prospects of any formal approach materialising was highly uncertain.

The person added, however, that Dame Carolyn McCall, ITV’s long-serving chief executive, had been discussing with the company’s financial advisers the merits of a demerger or other form of separation of its two main business units.

More from Money

Its main banking advisers are Goldman Sachs, Morgan Stanley and Robey Warshaw.

ITV’s shares are languishing at just 65.5p, giving the whole company a market capitalisation of £2.51bn.

The stock rose more than 5% on Friday amid vague market chatter about a possible takeover bid.

Bankers and analysts believe that ITV Studios, which made Disney+’s hit show, Rivals, would be worth more than the entire company’s market capitalisation in a break-up of ITV.

People close to the situation said that under one possible plan being studied, CVC could be interested in acquiring ITV Studios, with a European broadcast partner taking over its broadcasting arm, including the ITVX streaming platform.

“At the right price, it would make sense if CVC wanted the undervalued production business, with TF1 wanting an English language streaming service in ITVX, along with the cashflows of the declining channels,” one broadcasting industry veteran said this weekend.

“They would only get the assets, though, in a deal worth double the current share price.”

Takeover speculation about ITV, which competes with Sky News’ parent company, has been a recurring theme since the company was created from the merger of Carlton and Granada more than 20 years ago.

ITV said this month that it would seek additional cost savings of £20m this year as it continued to deal with the fallout from last year’s strikes by Hollywood writers and actors.

It added that revenues at the Studios arm would decline over the current financial year, with advertising revenues sharply lower in the fourth quarter than in the same period a year earlier because of the tough comparison with 2023’s Rugby World Cup.

Allies of Dame Carolyn, who has run ITV since 2018, argue that she has transformed ITV, diversifying further into production and overhauling its digital capabilities.

The majority of ITV’s revenue now comes from profitable and growing areas, including ITVX and the Studios arm, they said.

By 2026, those areas are expected to account for more than two-thirds of the group’s sales.

This year, its production arm was responsible for the most-viewed drama of the year on any channel or platform, Mr Bates versus The Post Office.

In its third-quarter update earlier this month, Dame Carolyn said the company’s “good strategic progress has continued in the first nine months of 2024 driven by strong execution and industry-leading creativity”.

“ITV Studios is performing well despite the expected impact of both the writer’s strike and a softer market from free-to-air broadcasters.”

She said the unit would achieve record profits this year.

ITV and CVC declined to comment, while TF1, RedBird and Mediawan did not respond to requests for comment.

Continue Reading

Trending