Delta Two: Qatari group drops bid for Sainsbury

London / UK. (js) Delta (Two) Limited has concluded that it is not in the best interests of stakeholders to proceed with an offer for J. Sainsbury PLC and has informed the Board of Sainsbury of this decision.

On July 18 the Qatari group announced that it was in preliminary discussions with Sainsbury relating to the possibility of Delta Two making a cash offer to acquire the balance of the ordinary share capital of Sainsbury that it did not already own.

Since Delta Two´s original proposal was submitted to the Board of Sainsbury, the required funding and cost of capital has increased significantly, which has adversely affected the investment case. This reflected a combination of factors including the deterioration of credit markets which impacted the terms of lending and other facilities available to Delta Two following the initial approach to the Sainsbury Board and the arrangements for the future funding of the Sainsbury pension schemes necessary to gain the backing of the Sainsbury pension trustees for any offer by Delta Two. In dealing with the funding implications presented by these issues, Delta Two´s objective has been to ensure that following acquisition Sainsbury’s capital structure would enable it to remain a robust competitor in its markets, even in challenging industry conditions.

Paul Taylor, Principal of Three Delta LLP («Three Delta»), which is the strategic investment adviser to Delta Two in relation to its investment in Sainsbury, said: «Delta Two has strict investment criteria and has approached this opportunity in a disciplined manner. Having given careful consideration to the additional funding requirement and its impact on prospective investment returns, Delta Two has regretfully concluded that a recommendation to proceed with the proposed transaction would not be in the best interests of stakeholders, and therefore such recommendation cannot be made. We greatly appreciate the co-operation of the Board and management of Sainsbury, and the constructive and collaborative nature of our discussions with both them and the trustees of the Sainsbury pension funds. Sainsbury is an excellent company with a strong management team, leading market position and strong long-term growth opportunities. Delta Two remains fully supportive of management’s operational strategy».

Announcement by J. Sainsbury PLC regarding approach from Delta Two

London / UK. (js) J. Sainsbury PLC («Sainsbury´s» or the «Company») was informed late on 04 November by Delta (Two) Limited («Delta Two») that it has decided not to proceed with an offer for the share capital of Sainsbury´s.

The Making Sainsbury´s Great Again recovery plan is now well established and the Company has delivered eleven consecutive quarters of like-for-like sales growth. Sainsbury´s also announced new three-year targets, from Recovery to Growth, in May 2007. As stated within its Quarter Two trading statement, released on 10 October, the Company´s first half sales performance is in line with expectations for the current year. The Interim Results will be reported on 14 November, at which time the Company will present an update on its first half performance and progress to date on its new targets.

Chairman Sir Philip Hampton says: «Sainsbury´s has attractive future prospects and the recovery strategy commenced in 2004 is well advanced and continuing to deliver growth in the business. We have a first class management team and colleagues to drive the business forward». Chief Executive Justin King says: «Interest in Sainsbury´s has been borne out of the Company´s success to date in implementing its recovery strategy. We have remained focused on delivering great service to customers over recent weeks and months and have made significant progress towards Making Sainsbury´s Great Again. All colleagues can now continue to deliver towards the targets we have set».