Analysts have been speculating about the reasons behind wholesale group Bestway acquiring a 3.5% stake in Sainsbury’s, worth around £193 million.
The wholesale business – which also owns the Costcutter, Well Pharmacy and Bargain Booze retail chains – claims that a takeover is not on the cards, as “it is not considering an offer” for the supermarket giant.
In addition to the possibility of a more significant deal or merger in the future, the move also raises questions over whether Sainsbury’s will make a U-turn on its pharmacy closures, which were announced earlier this month.
Bestway acquired The Co-op Group’s pharmacy business for £620 million in 2014, rebranding it as Well Pharmacy. It is currently the UK’s largest independent retail pharmacy chain, leading to speculation that it could take over the LloydsPharmacy concessions in Sainsbury’s stores.
Bestway has also said that it may look to purchase more Sainsbury’s shares “from time to time”, directing any interested sellers to contact its broker Redburn. It currently owns 80.7 million shares – equivalent to a 3.45% stake in the Big 4 grocer.
According to AJ Bell investment director Russ Mould, publishing a statement inviting existing shareholders to sell some of their stake to the wholesale group “suggests it is serious about building up its stake”.
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The fact that Bestway wants to buy more shares “implies it wants a seat at the table”, Mould told Proactive Investors.
“Having a stake above 3% arguably gives Bestway the power by which to demand proper conversations with the business and push for a seat on the board of directors.
“A notable stake in the business also suggests it is serious about wanting to collaborate. It’s very rare for these types of transactions to simply be about making money from owning the shares.”
Shore Capital analyst Clive Black added that it “remains to be seen” if the move is “a pre-cursor to greater ownership aspirations or a route to try and collaborate with Sainsbury’s from a trading perspective”.
He continued that the move was likely to spark some conversations around both “Sainsbury’s and the wider sector with respect to corporate activity and equity values”.
Recently, LloydsPharmacy announced it pulling out of 237 pharmacy sites currently located within Sainsbury’s supermarkets, just seven years after buying the in-store services for £125 million.
As a result, over 2,000 jobs are at risk by the end of the year, when the process is expected to be complete.
Grocery Gazette contacted Bestway, which has declined to comment.
