Sainsbury’s shares surge as Bestway takes stake in supermarket giant

British wholesaler Bestway has a 3.45 percent stake in retail giant Sainbury’s, the group announced on Friday.

Bestway, Britain’s seventh-largest family-owned company with a turnover of around £4.5 billion, indicated it could take an even larger stake in Britain’s second-largest supermarket, “subject to availability and price’, but insisted it does not intend to make a takeover bid.

Sainsbury’s shares rose 6.1 percent in early trading to 253 pence, pushing January gains to 12.3 percent and year-over-year losses to 14.7 percent.

Also operating out of Pakistan, Bestway is the UK’s second largest wholesaler and owner of the UK’s third largest pharmacy chain, Manchester-based Well Pharmacy.

It also owns Bargain Booze and Wine rack, which it bought for £7m following the collapse of Conviviality, saving 2,000 jobs at the time.

Founded by Sir Anwar Pervez, Bestway opened its first wholesale warehouse in Acton, West London, in 1976, with new locations in the early 1980s in Southall, Hackney and Park Royal. The company eventually expanded all over the country.

The group is the UK’s second largest wholesaler and also runs the country’s third largest pharmacy chain, Well Pharmacy, based in Manchester.

In February 2021, Bestway completed the acquisition of Costcutter Supermarkets.

Bestway told investors on Friday it “intends to hold its shares in Sainsbury’s for investment purposes and looks forward to supporting the executive management team.”

It added: ‘Bestway Group may from time to time attempt to make further market purchases of Sainsbury’s shares, subject to availability and price.

Bestway Group confirms it is not considering a bid for Sainsbury’s.

Sainsbury’s acknowledged the statement and said it will “engage with Bestway Group in accordance with our normal interactions with shareholders”.

Senior investment manager at RBC Brewin Dolphin John Moore said the deal is “another indicator that UK stocks are cheap, especially in the retail sector, which has a bit of a dark cloud over it.”

He added: “While it seems unlikely that the company will make an offer, the deal will throw a cat among the pigeons and remind stock market-minded investors that the trade value for assets can be much higher.

Sainsbury’s is one of the least favored FTSE 100 stocks among analysts, according to our research, and the fact that it has been targeted by investment from another industry player could lead to a surge of activity within the company and beyond. ‘

Sainsbury’s recently raised its profit forecast after a ‘record’ Christmas performance that came despite pressure on shoppers from the rising cost of living.

In the face of consumer tightness and the rapid growth of discounters Aldi and Lidl, Sainsbury’s has made an effort to keep its products affordable.

In November, Sainsbury’s confirmed it planned to invest a further £50m in pricing by March, bringing the total investment to keep consumer costs down to £550m.

Head of Investment at Interactive Investor Victoria Scholar said: “Between August 2021 and October 2022, shares in Sainsbury’s suffered a difficult shift that saw around 45 per cent of their market value lost.

‘But since the lows, the supermarket has gained ground. Perhaps Bestway wanted to make the most of its relatively low share price before the stock gained further ground.”