Delta Two, an investment fund backed by the Qatar Investment Authority, will abandon its £10.6 billion ($22 billion) bid for London-based J Sainsbury PLC, Britains third-largest supermarket chain, because of deterioration of credit markets and future pension funding, according to a news release from the Qatari fund.
The required funding and cost of capital has increased significantly, which has adversely affected the investments case, the release said.
Delta Two had approached the supermarket chain on July 18 with an all-cash offer. During negotiations, Sainsbury officials had asked for an extra £500 million, partly to help secure the companys £4.3 billion pension fund.
The pension issue is clearly a big issue, said Bryan Robert, analyst at the London-based consulting firm Planet Retail. But I think its a combination of that and the credit crisis (since the initial proposed bid), plus cold feet about the trading environment in general.
Delta Two retains a 25% stake in Sainsbury and can make another bid after six months under U.K. regulations.