Linklaters finalises Sainsbury’s deal

Linklaters & Alliance has completed the complex £969m sale of J Sainsbury’s DIY business Homebase to Schroder Ventures.

A 25-strong team led by corporate partner Mark Stamp acted on the transaction, which also involved the sell-off of 28 development sites to rival B&Q parent Kingfisher, represented by Freshfields Bruckhaus Deringer and led by head of corporate Barry O’Brien.

Clifford Chance, led by corporate partner David Walker, acted for Schroder Ventures, which set up a newco to acquire the company. The debt package included senior debt with a layer of mezzanine, lent and underwritten by UBS AG.

Banking partner Iain Goalen of Shearman & Sterling acted for UBS AG. UBS Warburg also acted as Sainsbury’s financial adviser.

Stamp says the deal was particularly complex for a number of reasons, including the sale of the 28 development sites to Kingfisher. “It was very unusual,” he says. “Kingfisher was buying a number of sites that were non-trading and some that don’t even exist yet and are still subject to planning permission. Most of the development agreements haven’t been signed, so we were selling on an idea.”

Stamp says the original idea had been to sell off the Homebase group as a single entity, but adds: “It wasn’t possible to sell the venture capitalist for the price we wanted. It suited them because they didn’t want the capital expenditure to finance [the sites].”

Sainsbury’s has also retained, for £31m, an 18 per cent stake in Homebase, which Stamp says added to the complex nature of the deal.

Schroders paid a total of £416m in cash and a vendor loan note worth £75m, while an agreement between Homebase and Sainsbury’s sees £259m worth of freehold properties being transferred to the supermarket giant which will be leased back to Homebase. Sainsbury’s is then free to sell them in the future.

The deal effectively consolidates Linklaters’ position as a main corporate adviser to Sainsbury’s.

Just two years ago the supermarket chain broke a 50-year exclusive agreement with Denton Hall, now Denton Wilde Sapte (DWS), to expand its panel (The Lawyer, 3 May 1999).

DWS, however, still acts for the company on a day-to-day basis and was involved in providing property advice for the Homebase deal.