Sainsbury’s in talks to offload banking arm to buyout firm Centerbridge

Published

3 years ago

August 28, 2021

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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.

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.

Business

Chelsea co-owner Boehly goes into bat with Lords cricket bid

Published

5 hours ago

November 2, 2024

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Chelsea co-owner Boehly goes into bat with Lords cricket bid

The joint owner of Chelsea Football Club has joined forces with one of his fellow board members to bid for the most valuable team in English cricket’s Hundred competition.

Sky News has learnt that Todd Boehly is backing a bid spearheaded by Jonathan Goldstein, a British property entrepreneur, in an offer for a large stake in London Spirit, the Lords-based franchise.

The bid represents the latest move by Mr Boehly, a billionaire financier, to gatecrash the British sporting elite, following his takeover of Chelsea in 2022 alongside Behdad Eghabli, the founder of Clearlake Capital.

Recent reports suggest the pair have fallen out and are looking at ways to buy each other out of the club.

Mr Boehly’s interest in the London Spirit franchise puts him and Mr Goldstein on a shortlist of a handful of bidders for – at least – a 49% stake in it.

Sources said this weekend that the other contenders to buy the interest as part of a process run by the England and Wales Cricket Board were Sanjiv Goenka, an Indian billionaire who owns the Indian Premier League’s (IPL) Lucknow Super Giants; the owners of the IPL’s Chennai Super Kings; India’s ultra-wealthy Ambani family; and possibly members of the Glazer family, which retains the largest stake in Manchester United Football Club.

The London Spirit franchise is expected to command the highest price of the eight teams being auctioned, with one of Chelsea’s lenders, Ares Management, plotting the purchase of a stake in the Oval Invincibles, Sky News revealed on Friday.

CVC Capital Partners, one of the most prolific backers of global sport with stakes in the men’s professional tennis tour and rugby union’s Six Nations Championship, is also bidding for the Oval Invincibles.

Insiders said CVC had also submitted offers for two other Hundred franchises.

In total, roughly 35 bids are said to have been shortlisted for the eight teams, with the respective host counties able to decide whether they offload part of their 51% stake in order to give new investors control of the franchise.

Those 35 proposals are, in turn, said to have come from 15 separate investor groups.

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The teams are in aggregate understood to have been valued at more than £600m in the first round of the auction, with the proceeds distributed across the recreational game, the 18 first-class counties and the MCC, which owns Lords.

The eight host venues play home to teams including the Northern Superchargers, Manchester Originals and Southern Brave.

A bigger-than-expected windfall from the process could offer a financial lifeline to a number of cash-strapped counties, with part of the proceeds likely to be used to pay down debt.

Concerns have been raised, however, that windfalls from the Hundred auction will not deliver a meaningful improvement in counties’ long-term financial sustainability.

The outcome of the auction, which will become clear in the coming months, is also likely to intensify other searching questions about the future of cricket, as the Test format of the game struggles for international commercial relevance against shorter-length competition.

The Hundred auction is being handled by Raine Group, which also oversaw the sale of Chelsea to Mr Boehly and Mr Eghbali two years ago after Roman Abramovich was sanctioned by the government.

Mr Goldstein, CVC and the ECB declined to comment on the process.

Business

Investment giant KKR wades into Thames Water survival battle

Published

8 hours ago

November 2, 2024

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One of the world’s largest investment firms has waded into the fight over the future of Thames Water, the water utility which is racing to stay afloat.

Sky News has learnt that KKR is in talks with Thames Water and its advisers about participating in a £3bn share sale which forms part of a wider recapitalisation plan.

City sources said this weekend that KKR, which has more than $550bn of assets under management, was among a handful of parties which had accessed a data room for potential investors.

Rothschild, the investment bank, is running a process to raise around £3bn from the sale of an equity stake in Thames Water, which is grappling with a debt mountain of as much as £19bn.

Other investors which have expressed interest in acquiring newly issued shares in the water company include Carlyle and Castle Water, the latter of which is controlled by Graham Edwards, the Conservative Party treasurer.

Global Infrastructure Partners, which is owned by BlackRock, Brookfield and Isquared are also reported to have lodged an interest, although sources said that the latter two were unlikely to play any further role in the process.

The crisis at Thames Water is presenting Sir Keir Starmer’s administration with a challenge as the debt-laden company attempts to avert temporary nationalisation.

Insiders said that KKR was “a serious player” in the equity process being run by Thames Water, although its outcome hinges on a final determination by Ofwat, the industry regulator, which is due by January at the latest.

Thames Water – and other suppliers across Britain – wants to hike bills and is demanding leniency from Ofwat on fines for past transgressions.

One obstacle to KKR buying a big stake in Thames Water, which has more than 15m customers, may be its 25% holding in Northumbrian Water.

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Under Ofwat’s mergers regime, the Competition and Markets Authority would need to review the deal, although there would not be an automatic prohibition.

The share sale process is being run in parallel to an attempt to raise up to £3bn in debt financing from hedge funds and other investors.

A battle has broken out between the holders of Thames Water’s class A bonds, which account for the bulk of its borrowings, and its riskier class B debt.

Both sets of bondholders have submitted proposals to the company, with the class A’s arguing that theirs is more certain and the class B’s arguing that theirs will save the company £380m or more in fees and interest over a 12-month period.

Thames Water has already endorsed the class A group’s offer, with an initial £1.5bn of funding to be delivered immediately.

The class A bondholders are now trying to secure backing for their proposal within the next fortnight.

Their group, which includes the American hedge funds Elliott Advisers and Silverpoint, would earn in the region of £650m during the first year of the financing.

One area of controversy is likely to be any incentive plan for Thames Water bosses, led by chief executive Chris Weston, as part of a deal to give the company a stay of execution.

Last month, the environment secretary, Steve Reed, established an independent review of the industry that will look at far-reaching reforms.

It was unclear this weekend which of KKR’s funds was participating in the Thames Water equity-raise.

The firm owns John Laing, an infrastructure investor, which it took private in 2021.

It has also owned South Staffordshire, another water company, selling its 75% interest in 2018.

KKR declined to comment.

Business

Reynolds to hold talks with bosses amid business budget backlash

Published

1 day ago

November 1, 2024

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Reynolds to hold talks with bosses amid business budget backlash

The business secretary will next week hold talks with dozens of private sector bosses as the government contends with a significant corporate backlash to Labour’s first fiscal event in nearly 15 years.

Sky News has learnt that executives have been invited to join a conference call on Monday with Jonathan Reynolds, in what will represent his first meaningful engagement with employers since Wednesday’s budget statement.

Rachel Reeves, the chancellor, unsettled financial markets with plans for billions of pounds in extra borrowing, and unnerved business leaders by saying she would raise an additional £25bn annually by hiking their national insurance contributions.

An increase in employer NICs had been trailed by officials in advance of the budget, but the lowering of the threshold to just £5,000 has triggered forecasts of a wave of redundancies and even insolvencies across labour-intensive industries.

Sectors such as retail and hospitality, which employ substantial numbers of part-time workers, have been particularly vocal in their condemnation of the move.

On Friday, the Financial Times published comments made by the chief executive of Barclays in which he defended Ms Reeves.

“I think they’ve done an admirable job of balancing spending, borrowing and taxation in order to drive the fundamental objective of growth,” CS Venkatakrishnan said.

His was a rare voice among prominent business figures in backing the chancellor, however, with many questioning whether the government had a meaningful plan to grow the economy.

Mr Reynolds held a similar call with business leaders within days of general election victory, and over 100 bosses are understood to have been invited to Monday’s discussion.