The legendary British supermarket chain, Sainsbury’s might get a new lease on life as shares rose amid talks that Crystal Amber Fund, a U.K activist hedge fund, is likely to take a stake, as reported by the Telegraph. Shares of Sainsbury’s rose 3.7% to a market cap of 4.7 billion pounds ($7.3 billion) on Monday.
Crystal Amber was approached by a U.S. investor who was interested in buying a stake in Sainsbury’s. The investment and turnaround is likely to be a combined effort, with Crystal Amber saying it intends to buy “tens of millions of pounds” worth of the supermarket’s shares.
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Nick Bubb, an independent retail analyst, said, “Looking to build a stake in Sainsbury and force it to sell off freehold properties seems like a bull story, when it is painfully clear that supermarkets are in a bear market.”
The supermarket space in Britain has been hit hard through ecommerce and competition from lower priced chains. While Sainsbury’s trades at a low valuation, Motley Fool reports that Sainsbury’s expects to cut its dividend by 23%. The company has seen a 19% reduction in earnings.
Qatar, which owns 26% of Sainsbury’s outstanding shares, attempted a failed takeover of the company in 2007. Crystal Amber wrote in a statement that it is considering a sale and leaseback program from the supermarket.
Warren Buffett purchased a considerable stake in Sainsbury’s competitor, Tesco. However, Buffett eventually sold his position, calling the investment a “huge mistake.” Perhaps Crystal Amber will have better luck with Sainsbury’s than Buffett had with Tesco.
John Benjamin Sainsbury was born in 1871 and founded the supermarket chain. He married Dutch Jewish heiress Mabel Van Den Bergh, and there sons, Alan and Robert Sainsbury, ran the family business.