KKR retreats from Sainsbury’s deal

US private equity house Kohlberg Kravis Roberts (KKR) has pulled out of the CVC-led consortium that is mulling an £9.5bn offer for J Sainsbury, the UK’s third-largest supermarket.

The Clifford Chance-advised consortium now comprises Blackstone and Texas Pacific Group, as well as longstanding Clifford Chance client CVC.

The three private equity houses now have until 13 April to make a formal offer for Linklaters client J Sainsbury under the terms of a ‘put up or shut up’ notice issued by the Takeover Panel (The Lawyer, 6 March).

Should they decide not to make an offer, under the Takeover Code the consortium would be prevented from making another bid for the supermarket chain for another six months.

KKR’s departure means that the consortium’s individual parties will either have to stump up more cash or quickly find another consortium player. A formal offer may be tabled as early as the end of the day, it has been reported, at around 550p per share.

A report by Reuters today, which cited unnamed sources, said competition concerns and the amount of the potential bid were to blame for KKR’s exit. In the last few days media speculation has mounted about tensions between KKR and the rest of the consortium.

Earlier this month KKR increased its bid for another UK household name, Alliance-Boots, to £10bn in a potential management buyout with the company’s deputy chairman Stefano Pessina. Slaughter and May client Alliance-Boots agreed last week to open its books to Pessina and KKR for due diligence.

Clifford Chance is also advising KKR on that bid, with Macfarlanes and French independent Darrois Villey Maillot Brochier advising Pessina.

After the news of KKR’s departure, shares in Sainsbury’s dropped by 5p today to 556p.