Private equity firm CVC today abandoned plans for a #10.1 billion offer for supermarket giant Sainsbury’s.

The end of its interest in the UK’s third largest food retailer comes after its proposed offer price reportedly failed to win over the Sainsbury family, which holds an 18% stake in the business.

CVC said: "After a number of discussions between the board of Sainsbury and the consortium, it became clear that the consortium would be unable to make a proposal that would result in a successful offer."

The news comes just over two months after the CVC-led consortium first admitted it was considering an offer for the business.

It proposed 582p a share, equivalent to #10.1 billion, but it is thought that the Sainsbury family believed the business was worth at least 600p a share.

CVC’s partners in the bid, Blackstone and Texas Pacific, pulled out of the deal this week, while a fourth, Kohlberg Kravis Roberts, withdrew last week.

The private equity interest in Sainsbury’s reportedly foundered on opposition from the family stakeholders in the business.

The firm’s last family chairman, Lord (David) Sainsbury, and his family own 18% of the supermarket chain in total - a significant blocking minority to any unwelcome would-be bidder for the firm. This is despite the family not running the business since 1998, when the peer stepped down.

Sources close to the CVC-led consortium, which offered 582p a share for the business - valuing it around #10.1 billion, have said their proposal offered a huge premium to the 410p at which the firm was trading earlier this year before the bid rumours surfaced.

But according to the reports, Lord David Sainsbury - who owns 7.75% of the company - could not "for the life of him" see why the company should open its books to any bidders for less than 600p a share. Other family members reportedly opposed a sale full stop.

Lord Sainsbury’s career has seen much public service alongside the stewardship of the business. Ennobled in 1997, he was science minister in the DTI until November last year, with his shares held in a blind trust until February. He is also carrying out a review of science and innovation policies for the Government this year.

The Sainsbury family has also been a strong supporter of the arts, following in the footsteps of Lord David Sainsbury’s father Sir Robert, a former chairman of the Tate Gallery. The family donated the funds for a new wing at the National Gallery, which opened in 1991.

But David Sainsbury’s #10.4 billion valuation of the business was the final nail in the coffin for a private equity team that was already struggling in talks with the Sainsbury’s pension trustees over a potential #3 billion pension deficit.

TIMELINE

February 2: Shares in Sainsbury’s soar as a trio of private equity investors - CVC, Kohlberg Kravis Roberts and Blackstone - reveal they are weighing up a possible takeover offer. Analysts suggest the firm could be worth 600p a share, which at more than #10 billion would represent a record bid for a UK retail firm.
February 6: Private equity firms Cinven and Texas Pacific are linked to a rival approach, while Marks & Spencer is also said to have considered the merits of a bid.
March 6: The private equity consortium is given until April 13 to declare whether they intend to make an offer. The "put up or shut up" deadline from the Takeover Panel follows an appeal to the regulatory body from advisers to Sainsbury’s.
March 9: KKR’s future involvement in the Sainsbury’s offer is questioned after it also emerges as a bidder for Alliance Boots.
March 23: It is reported that private equity suitors face a potential #3 billion pensions hurdle. While Sainsbury’s had a pensions deficit of #477 million in October, the Financial Times said the shortfall could be #1 billion because of a new conservative investment strategy. The calculation rises to between #2 billion and #3 billion if a new owner makes no further contributions.
March 28: Sainsbury’s reports higher than expected sales figures, driven by a strong performance from new stores and higher grocery prices. Like-for-like sales, excluding petrol, for the 12 weeks to March 24 are up 5.9%.
April 5: KKR pulls out of the running for the chain. However, the three remaining parties prepare to make an indicative #9.7 billion offer.
April 10: Shares in Sainsbury’s slide as takeover hopes fade. While the bid group reportedly improves its offer to 582p a share, or #10.1 billion, there remains opposition from family shareholders and it later emerges that Blackstone and Texas Pacific have also pulled out, leaving just CVC.
April 11: CVC announces that the consortium is no longer considering an offer for Sainsbury’s.