Market report: Sainsbury’s in City’s sights as bid rumours grow for suffering supermarket

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It emerged at the weekend that activist fund Crystal Amber has been holding talks with US funds to buy up shares and either force a shake-up at the struggling supermarket group or pave the way for a takeover.

With the big four supermarket chains in the UK in the doldrums amid shrinking market share against the discounters, Crystal Amber compiled a 60-page dossier on how Sainsbury’s should shake things up, focusing on the fact that refinancing its debt would reduce its cost of capital and make the group a more-attractive investment case. Splitting off its property assets was also on the table.

Suggestions Sainsbury’s could become a target for a US retailer were also mooted in the market and the shares ticked up 7p to 245.3p.

In addition, investors cast their eyes over a note from Bernstein Research which declared the supermarket’s planned savings will “compensate for margin decline”.

It said: “As the most leveraged UK retailer, Sainsbury’s profitability would have the furthest to drop. We believe the market is not giving Sainsbury’s enough credit for its quality differentiation,” and rated it outperform, with a 330p price target.

The wider market was weak after Chinese trade data fell short of expectations and the FTSE 100 fell by  37.29 points to 6705.55.

Royal Bank of Scotland put the for sale sign over private bank Coutts International which could raise £650 million, but its shares declined 2.2p to 401.3p.

Russian-focused miner Petropavlovsk reached agreement with its bondholders and for a $235 million (£150.7 million) rights issue at 5p a share to cut its debt and its shares fell by 5.5p to 10.5p.

AIM-listed Cluff Natural Resources updated on an exploration target for its coal gasification licence at Point of Ayr in north Wales and the shares advanced 0.38p to 4.88p.


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December 8, 2014 |
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