Costcutter owner Bestway takes 3.45% stake in Sainsbury's

UK Costcutter convenience store owner Bestway Group has bought a 3.45% stake in supermarket giant Sainsbury's which it may increase, but said it was not considering an offer for the chain.

Privately-owned Bestway is the seventh-largest family-owned business in the UK with turnover of approximately £4.5bn and has 2,700 convenience stores under the Costcutter and Best-one banners.

Founded in 1963, it now has interests across the wholesale, pharmacy, real estate, cement and banking sectors and employs more than 28,000 people across the UK, Pakistan and the Middle East.

“Bestway Group intends to hold its shares in Sainsbury's for investment purposes and looks forward to supporting the executive management team. Bestway Group may look to make further market purchases of Sainsbury's shares from time to time, subject to availability and price,” the company said on Friday.

In response, Sainsburys said it would “ engage with Bestway Group in line with our normal interactions with shareholders”.

Bestway's statement ruling out a bid precludes such a move for six months, unless a rival bid emerges, under UK Takeover Panel rules.

Russ Mould, investment director at financial services company AJ Bell said that while Bestway said it would not bid now, the fact it has openly stated it wantes to buy more shares "implies it wants a seat at the table".

"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," he said.

“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...the line that it looks forward to supporting the executive management team implies that this is going to be a hands-on relationship."

“Should Bestway want to make a full bid down the line, it would have to make a convincing offer to get Qatar Investment Authority to want to part with its 14.3% stake, and the same for Vesa Equity Investment which owns just over 10% of the supermarket.”

Reporting by Frank Prenesti for Sharecast.com