Opinion: Bestway upping its stake in Sainsbury’s could be pivotal for the industry

David Gilroy

This was not written in the script. Everyone knows it is the multiples that play the leading roles. Their poorer cousins, the wholesalers, are the walk-on extras. Following the Tesco acquisition of Booker in 2018, all the speculation was around which major supermarket would be next to purchase a wholesaler. Times are changing, and we are witnessing something of a role reversal.

Asda is owned by a couple of blokes who started off running a petrol station in Blackburn. They have gone on to build a retail empire and show no signs of slowing down.

The recent news that Bestway took a stake in Sainsbury’s was unexpected, and sent shock waves through the industry. In a matter of days, Bestway’s stake increased from 3.5% to 4.47%. Any intentions of making a bid were, and are, being denied. The Qatar Investment Authority holds 14.3% equity in Sainsbury’s and the Czech billionaire Daniel Kretinsk’s Vesa Equity Investment 10%. Financial commentators are not expecting bids any time soon. It is also worth noting that Sainsbury’s revenues at £30bn are way higher than the Bestway Group’s £4.5bn.

This will not stop Sainsbury’swatchers being on high alert. Sainsbury’s offers great value, and anyone considering a bid will have to accelerate their plans. The share price has surged from £2.19 at the turn of the year to £2.63 at the time of writing.

Could Bestway really come to own Sainsbury’s? The two companies are aligned in many respects. They are culturally similar, with family values, a serious responsibility to their employees, and a clear understanding and connection with their customers, and both have high reputational standards.

Bestway has always stew- arded its business responsibly. It likes solid assets, primarily high-cash-generative businesses and property ownership.

It has carefully grown the business from zero in 1976 to a multi-billion-pound organisation. Bestway is brilliant at assessing risk and weighing up value.

Its negotiating skills are legendary, and it is not afraid to make the big calls. The company’s most recent published results were nothing short of stellar, with turnover at £4.51bn and profit at £399m.

If Bestway was to buy Sainsbury’s and take it private, it would be on a sound financial platform – not a company leveraged to the hilt on massive debt.

Bestway could be planning collaboration with Sainsbury’s in the convenience or pharmacy store sectors. Or maybe it could make another big call and follow through on a full-on bid? Could Bestway digest such a big entity? Absolutely yes, it could. If the Issa brothers can buy and run Asda, why

The prospect is mouth-watering. Sainsbury’s is a well-run company with great management and the infrastructure to scale for growth. There are some strong benefits on both sides, and such a combination would unlock tons of value – trading terms, distribution infrastructure, fresh-food expertise, ownlabel provenance and cross-selling, to name but a few.

The shared knowledge alone would be worth a fortune, and Bestway would be respectful of Sainsbury’s name and heritage.

Sainsbury’s has been in play for some time and looks undervalued. Bestway has just fired the starting gun. Prospective bidders will be crunching the numbers. If the bids come, it will ultimately be the shareholders who decide.

No one knows how this will develop, but Sainsbury’s could do a lot worse than becoming part of the Bestway Group. What a turnup that would be. l

Your New Favourites Your New Favourites