Sainsbury’s ends talks on sale of banking unit

Sainsbury’s Bank currently has around two million customers and offers products such as credit cards and home insurance. Photo: Dinendra Haria / SOPA Images / LightRocket via Getty Images

UK supermarket chain Sainsbury’s (SBRY.L) has confirmed that it has ended its discussions on the sale of its banking unit.

The company, which is Britain’s second-largest grocer, said the potential offer did not offer good shareholder value.

“While the Sainsbury’s Board of Directors believes it was in the best interests of shareholders to explore these expressions of interest, they concluded that they did not provide better shareholder value than would be realized. by keeping Sainsbury’s Bank, “he said in a brief statement. declaration.

“We continue to make progress in strengthening and simplifying our financial services business in line with our strategy and we remain comfortable with the consensus earnings outlook for the division. “

Current analysts’ consensus for underlying financial services operating profit for the current year is between £ 22million (£ 30million) and £ 26million, £ 43million for 2022-2023 and £ 49million the following year.

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The bank, which was originally formed in 1997 as a joint venture between the retailer and Bank of Scotland, set a goal of doubling the underlying pre-tax profit and returning cash to the parent company of ‘by 2025.

It currently has around two million customers and offers products such as credit cards and home insurance.

The anonymous suitor first entered the scene in November last year with a possible acquisition of the Edinburgh-based banking arm.

The bank is reportedly in talks with US private equity group Centerbridge Partners, with the deal valued at around £ 200million.

Shares fell 0.7% in London on the news.

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Danni Hewson, financial analyst at AJ Bell, said: “Sainsbury’s disappointed the market when it heard that it was ending negotiations on the sale of its banking division. A more streamlined Sainsbury’s might have made more sense as an offer target, and there has been significant speculation on this front since the takeover of rival grocer Morrisons.

Earlier this week Morrisons (MRW.L) Shareholders gave the green light to U.S. firm Clayton, Dubilier and Rice (CD&R) for its £ 7bn ($ 9.6bn) offer for the company.

CD&R, which had former Tesco boss Terry Leahy as its senior advisor, narrowly won an auction for Morrisons after bidding a dime more than Fortress Investment Group.

CD&R emerged victorious from its 287p per common share against a 286p bid from its competitor offering. The winning bid represented a 61% premium over the Morrisons share price before the public interest was made public in June.

The total value of CD & R’s final offering, including debt, is £ 9.8 billion.

Watch: Could Sainsbury’s be the next to make a takeover bid?

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