Why did Sainsbury's shares just skyrocket 15%?
The UK’s second largest supermarket chain stock price shot up amid rumours that several investment firms are interested in buying out the company.
- Sainsbury's (LON: SBRY) shares soared to a seven-year high on Monday (23 August)
- The stock rally came on the back of reports that US investment group Apollo is interested in taking over the company
- Last week, Morrisons, UK’s fourth largest supermarket, agreed to a £7 billion offer
- Sainsbury's shares are up by over 50% in 2021
- Interested in trading Sainsbury's shares? Open an account to get started.
Sainsbury's stock price: what’s the latest?
Sainsbury's shares skyrocketed over 15% on Monday, following reports that several private equity funds are interested in acquiring majority stakes in the supermarket chain.
One of the funds, US investment group Apollo Global Management, is said to be the frontrunner of what is shaping up to be a bid war for the UK’s second largest supermarket chain, starting with a price tag of 7 billion pounds (US$9.53 billion).
Still, Apollo’s interest is ‘exploratory’, as it remains in talks to join fellow US investment firm Fortress Investment Group and other firms in bidding for Morrisons - the UK’s fourth largest supermarket group, The Sunday Times reported.
Last week, Morrisons agreed to a £7 billion bid proposal by US private equity giant Clayton, Dubilier and Rice. The Fortress-led consortium has since indicated it could offer a higher bid.
Thus, any further involvement by Apollo in that deal would mean the Sainsbury bid is off the table.
Despite the uncertainty, Sainsbury’s stock price hit a seven-year high of 341 pence at 14:00 (GMT+1) during the session.
These latest acquisition rumours about Sainsbury and Morrisons follow the sale of Asda, the country’s third largest supermarket chain, to EG Group and TDR Capital earlier this year. Apollo was a frontrunner in that deal but eventually lost out.
What’s your view on Sainsbury's? Take a position on the stock today
* Best trading platform as awarded at the ADVFN International Financial Awards and Professional Trader Awards 2019
How do analysts view Sainsbury's?
For now, Sainsbury’s market capitalisation stands at over £7.9 billion, after having risen over 50% so far this year.
One analyst, however, believes the FTSE 100 stock is worth more.
'Sainsbury’s is undeniably a good target for private equity with a considerable store estate, with the company having more than US$10 billion in property assets – more than its current market cap by decent margin,’ said Neil Wilson, an analyst at Markets.com.
'The Argos tie-up is another long-term growth lever and provides further scale, while profits are on the up again in the wake of the pandemic, and net debt has come down.
'It’s hard to beat those reliable cash flows – even without a big sale & leaseback plan the supermarkets are generating the kind of yield that is hard to get elsewhere,’ he added.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.