The Sainsbury’s share price is off to a flyer this morning after the Sunday Times reported private equity giant Appollo might soon bid for the British grocer. Following Fortress Investments Groups bid for Wm Morrison, speculation has been rife that Sainsbury’s will be the next British food retailer to attract the attention of private equity. Today, this reached a climax, sending the shares to a two-year high of 316p, up almost 8% (at time of writing).
Apollo Global Management, founded by under-fire billionaire Leon Black which manages more than $400 billion, is reportedly readying a bid for J Sainsbury plc (LSE: SBRY). This follows the investing titans failed takeover of Asda last year. Sainsbury’s, the UK’s second-largest supermarket chain, would certainly be a high profile scalp for Apollo, which would more than make up for losing out on ASDA to the Issa brothers in 2020.
Clearly, Sainsbury’s share price has already received a huge boost this morning. However, it’s likely to extend these gains in the coming sessions. Although, until a formal bid is made, it’s hard to predict just how much of a premium Apollo is willing to pay. An obvious price target for the bulls is the August 2018 high of 340p. Although, if a bid materialises, it may well be higher than this.
Although there is no smoke without fire, there is no guarantee, and on that basis, investors should give this consideration despite the report.
Putting the takeover talk to one side for a moment, the price has broken out of a rising trend channel at 300p. And the technical picture remains favourable as long as SBRY stays above that level. Should the share price slide below 300p, it could extend lower towards 285p, where it was trading on Thursday. Furthermore, if the bid is denied by Apollo or encounters obstacles, it may be enough to cause a deeper shake-out. However, for now, the bulls look firmly in charge.
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