U.K. Grocer Sainsbury’s Ends Talks on Selling Bank Unit
U.K. Grocer Sainsbury’s Ends Talks on Selling Bank Unit
(Bloomberg) --
J Sainsbury Plc said it ended talks on selling its banking services unit as the discussions wouldn’t reward shareholders enough.
Britain’s second-biggest supermarket chain said last November it received some expressions of interest in a possible acquisition of Sainsbury’s Bank Plc. The retailer was making progress to announcing a sale to Centerbridge Partners, Sky News said in August.
The grocer said Friday it will focus on strengthening and simplifying the banking division, which is on track to make an underlying operating profit of 26 million pounds ($36 million) in the current fiscal year. The bank has set a target of doubling underlying pretax profit and returning cash to the parent company by 2025.
Sainsbury’s is one of a number of grocers that expanded into finance products in a bid to shake up the U.K. banking scene, but shrinking margins have dented plans to challenge incumbents such as Barclays Plc and NatWest Group Plc. Tesco Plc, the U.K’s largest supermarket chain, offloaded its mortgage portfolio to Lloyds Banking Group Plc in 2019, and is closing all personal current accounts this year.
Sainsbury shares were little changed at 8:01 a.m. in London.
Sainsbury had invited potential suitors to submit bids in December, retaining UBS Group AG to run the formal sales process, Bloomberg previously reported.
Sainsbury’s Bank was originally established in 1997 as a joint venture between the retailer and Bank of Scotland, now a subsidiary of Lloyds Banking Group Plc. Sainsbury bought out Lloyds’s 50% share in 2014 to take full control of the bank. Today the bank has about two million customers and offers products including credit cards and home insurance.
The decision to end the sale of Sainsbury’s banking unit comes amid wider consolidation in the grocery sector. Clayton Dubilier & Rice LLC is in the final stages of completing a deal to takeover Wm Morrison Supermarkets Plc, the U.K.’s fourth-largest grocer. Speculation has arisen that Sainsbury’s could attract takeover interest too given the improving performance of supermarkets and a private equity industry that by mid-2021 had amassed a record $3.3 trillion of unspent capital.
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