Sainsbury (J) (SBRY)

[idpickering]

We fundamentally disagree with the provisional findings. These misunderstand how people shop in the UK today and the intensity of competition in the grocery market. The CMA has moved the goalposts and its analysis is inconsistent with comparable cases.

Combining Sainsbury's and Asda would create significant cost savings which would allow us to lower prices. Despite the savings being independently reviewed by two separate industry specialists, the CMA has chosen to discount them as benefits.

We are surprised that the CMA would choose to reject the opportunity to put money directly into customers' pockets, particularly at this time of economic uncertainty.

We will be working to understand the rationale behind these findings and will continue to make our case in the coming weeks.

https://www.investegate.co.uk/sainsbury ... 04135785Q/

[idpickering]

The findings from authority are here; Provisional findings

20 February 2019: The CMA has provisionally found extensive competition concerns as part of its in-depth investigation of the proposed merger between Sainsbury’s and Asda.

https://www.gov.uk/cma-cases/j-sainsbur ... er-inquiry

[Horsey]

Strange that the Tesco and Morrisons share prices have also gone down on the news.....

[idpickering]

Strange that the Tesco and Morrisons share prices have also gone down on the news.....

Such is the weakness in retail, and the shares of them. I don't mind admitting considering giving SBRY the boot, but the horse has already bolted. I'm certainly not topping up.

Ian.

[idpickering]

This from TMF;

Is there any hope for J Sainsbury as its mega-merger disintegrates?

J Sainsbury (LSE: SBRY) has fallen to earth with quite a bang this week. Its radical plan to transform the trading landscape through a ‘super-merger’ with Asda is seemingly in tatters after the Competition and Markets Authority suggested it would throw out the planned tie-up as it would be bad for consumers. Suggesting that an alliance could lead to “higher prices, reduced quality and choice, and a poorer overall shopping experience,” Sainsbury’s may be forced to go back to the drawing board to rescue its failing food operations.

The scale of the setback was underlined by the sharp sell-off of Sainsbury’s stock in the wake of the news. The supermarket’s share price collapsed to its cheapest for almost a year as people scratched their heads as to what other steps it can take to reinvigorate its declining stature with British shoppers.

https://www.fool.co.uk/investing/2019/0 ... ntegrates/

[Gengulphus]

Strange that the Tesco and Morrisons share prices have also gone down on the news.....

Not so strange, I think: any potential buyer or seller who is hoping even vaguely that they might be taken over at a nice premium must think it less likely now that the CMA appears to be getting stricter about whether they'll allow them to be taken over, and that will translate into them valuing the shares less highly. How much by will depend a great deal on how important that hope is in their thinking, but as an overall average across the market, the price which potential buyers are willing to pay and the price that potential sellers are willing to accept will both have come down, and that will have caused the market prices to fall.

Gengulphus

[dspp]

Also, if the CMA thinks that competition would be reduced by the merger, then Tesco etc are now facing stronger competition than if the merger had gone ahead.

- dspp

[idpickering]

This from TMF;

Why I’d avoid Sainsbury’s and buy this superstock instead

To say that the bosses of J Sainsbury (LSE:SBRY) and J D Wetherspoon (LSE: JDW) aren’t united in their views on Brexit is an understatement.

The supermarket’s chief executive Mike Coupe has been prominent among the UK’s big retail bosses in warning that a no-deal Brexit and trading under World Trade Organisation terms would increase food prices, cause significant disruption, and could put national food security at risk.

Meanwhile, Wetherspoon’s Brixiteer boss Tim Martin has lauded the prospect of a clean break from the EU and free trade, on the grounds it would reduce shop and food prices and be good for his customers.

Whatever the ultimate terms of the final divorce decree and economic repercussions, I’m convinced Sainsbury’s is a stock to avoid, while I’d happily buy Wetherspoon’s shares today, and hold them for the long term. Here’s why.

Ominous

Sainsbury’s has been struggling for a good number of years now. I was unconvinced by its acquisition of Argos in 2016. This upped its exposure to discretionary consumer spending which, from an investment perspective, is not really what I want from a defensive sector like food.

Its announcement last year of an agreed merger with Asda was more promising in this respect. However, as I warned readers, there was a chance the competition regulator would block it, and that even if it did go ahead, I would view it as fraught with execution risk. It now looks like the merger is unlikely to happen.

https://www.fool.co.uk/investing/2019/0 ... k-instead/

[PinkDalek]

This from TMF;

...

https://www.fool.co.uk/investing/2019/0 ... k-instead/

That one from Graham Chester (fka MobyDick) who is usually a good read. If you are able to state the author's name, it may encourage others to follow your TMF links (or not, as the case may be). Sorry to say it but I rarely do, although I chanced my arm this time.

Whilst here, thanks for the tip re refreshing the TMF pages, when without a log-in.

[idpickering]

This from TMF;

...

https://www.fool.co.uk/investing/2019/0 ... k-instead/

That one from Graham Chester (fka MobyDick) who is usually a good read. If you are able to state the author's name, it may encourage others to follow your TMF links (or not, as the case may be). Sorry to say it but I rarely do, although I chanced my arm this time.

Whilst here, thanks for the tip re refreshing the TMF pages, when without a log-in.

Thanks for your post, and the idea. I have a soft spot for TMF tbh. I learnt a lot reading their offerings. I shall take up your suggestion. I hold SBRY, and might just buy more soon.

Ian.

[idpickering]

Statement re proposed merger of J Sainsbury plc and Asda Group Limited

The Competition and Markets Authority (CMA) has today published its Final Report on the proposed merger of J Sainsbury plc (Sainsbury's) and Asda Group Limited (Asda), resulting in prohibition of the merger. As a result, Sainsbury's, Walmart and Asda have mutually agreed to terminate the transaction.

Sainsbury's CEO, Mike Coupe, said:

"The specific reason for wanting to merge was to lower prices for customers. The CMA's conclusion that we would increase prices post-merger ignores the dynamic and highly competitive nature of the UK grocery market. The CMA is today effectively taking £1 billion out of customers' pockets.

"Sainsbury's is a great business and I am confident in our strategy. We are focused on offering our customers great quality, value and service and making shopping with us as convenient as possible."

https://www.investegate.co.uk/sainsbury ... 03170207X/

[idpickering]

SBRY down 6% currently, in a weak market though. So glad I dropped them, despite my seemingly upbeat view two messages further up this page.

Ian.

[idpickering]

This from TMF, written by GA Chester;

Sainsbury’s share price slumps as Asda deal is blocked. This is what I’d do now

J Sainsbury (LSE: SBRY) was dealt a blow this morning when the Competition and Markets Authority (CMA) announced it had blocked the company’s planned merger with Asda. The shares slumped over 6% in early trading.

Here, I’ll give my view on Sainsbury’s prospects as a standalone business, and whether I’d personally buy, sell, or hold the shares today.

https://www.fool.co.uk/investing/2019/0 ... id-do-now/

[Pendrainllwyn]

I haven't read the article but I am not tempted even at what looks like a historic low since 1995. It traded above 400p in 1995 so has taken more than 20 years to go nowhere.

I sold SBRY in Feb 2018 at 250p a share for a small capital gain (plus dividends) having held it for a couple of years. Two months later it was over 300p and in August it hit 336p so my sale was not well timed but now with it trading at 216p I feel my decision looks justified.

I bought SBRY because it traded below book value, had a low PE ratio and a good dividend yield so I thought it represented value. Since then profits have gone nowhere and the dividend was cut in '15, '16 and '17 and held flat in '18. I sold because I changed the way I valued companies. In essence I now look for companies whose share price doesn't reflect the company's ability to deliver good returns on equity whilst growing book value per share. On this revised basis SBRY failed and I sold.

SBRY's ROE is poor (3)% in '15, 8% in '16, 5% in '17 and 4% in '18. I am not sure what re-energizes returns. They bought Home Retail and then tried the Asda deal. I suspect now that is off the table they will try something else. A successful deal may well get the stock back up but it may not happen and there are more exciting opportunities and better value elsewhere in my honest opinion.

Mike Coupe thinks Sainsbury's is a great business. I think it is for customers. I am not convinced it is for shareholders.

Good luck to those that hold and disagree with me.

Pendrainllwyn

[monabri]

I think Mr C 's singing didn't help! When he sang "we're in the money" he was probably thinking of his bonus.

[Wizard]

I think Mr C 's singing didn't help! When he sang "we're in the money" he was probably thinking of his bonus.

I wonder how much longer he will be in his job now.

[Dod101]

In mid 2014 I did myself a note about retailers in general and resolved not to hold them again. I had sold Sainsbury in January 2014 at £3.709, a good sale it would seem.

For the CMA to block a merger seems unusual. Surely they would normally allow it subject to certain conditions. That would seem to be the end of any more supermarket mergers and I suppose that Mike Coupe will be looking for another job shortly, after backing the wrong horse quite spectacularly.

Dod

[CommissarJones]

For the CMA to block a merger seems unusual.

Agreed, but IMV the Sainsbury-Asda proposal was an unusual case. This merger would have created a company with a larger share of the UK grocery market than Tesco, and if executives at Sainsbury and Asda thought the regulators would just casually wave this one through, they were dreaming. I'm guessing that Tesco's combination with Booker was viewed differently because that involved a retailer and a wholesaler, rather than two retailers.

[idpickering]

I actually sold half my SBRY holdings on 30 Oct 18 following a decent rise at 310.9p per share. I was losing faith in them, and decided to trim. I finally dumped the rest on 18 Mar 19, selling at 224p. I'm in no rush to buy any retail shares again.

Ian.

[idpickering]

Finals here; https://www.investegate.co.uk/sainsbury ... 00066529X/