Costcutter owner Bestway takes near £200m stake in Sainsbury’s | J Sainsbury

The owner of the Costcutter chain and one of the UK’s largest grocery wholesalers has taken a near-£200m stake in Sainsbury’s and said it could increase its position further.

The company, which describes itself as the UK’s seventh-largest family owned business with a turnover of £4.5bn, has bought almost 81m shares, giving it a 3.45% stake in the UK’s second-largest supermarket.

However, the group said it intended to hold its shares in Sainsbury’s “for investment purposes” and added that it looked forward to “supporting the executive management team”.

Bestway said it “may look” at purchasing more shares in the grocer, but this would be “subject to availability and price”.

It said it was not considering making a takeover bid for Sainsbury’s – a statement that bars it from such a move for six months, unless a rival bid emerges, under Takeover Panel rules.

The move makes Bestway the sixth-largest shareholder in Sainsbury’s.

Alongside its wholesale business, Bestway owns the UK’s third-largest pharmacy chain, Well Pharmacy, and more than 2,700 convenience stores under the Costcutter and Best-one brands.

Bestway did not disclose how much it paid for the stake. However, at Sainsbury’s closing price on Thursday of 239.4p, the stake was valued at £193m.

Shares in Sainsbury’s rose by as much as 4.5% on Friday, taking them to 250p, making the company one of the top risers on the FTSE 100.

Sainsbury’s said in a statement that it would “engage with Bestway Group in line with our normal interactions with shareholders.”

Clive Black, an analyst at Shore Capital, said it was not clear if Bestway had “the aspirations or the resources” to bid for Sainsbury’s or whether, as a major grocery wholesaler and pharmacy business, it wanted to “collaborate with Sainsbury’s from a trading perspective.”

Black said he was particularly surprised by Bestway’s statement that it was potentially interested in buying more Sainsbury’s shares. “I’ve been around a long time and not seen anything like this before. It’s like saying ‘here’s a phone number, give us a ring’,” he said.

Maureen Hinton, an independent retail analyst, said Bestway’s stake could give it leverage in potential negotiations over the future of pharmacy outlets in Sainsbury’s after the supermarket chain’s current partner Lloyds Pharmacy announced plans to close all 237 outlets.

“[Bestway’s] Well Pharmacy business would be a possible replacement for the Lloyds pharmacy exit,” she said in a tweet.

Sainsbury’s already has two major shareholders on its register who might be interested in backing a privatisation – the Qatar Investment Authority, which owns just over 14% of the shares, and the billionaire Daniel Křetínský, known as the “Czech Sphinx”, who holds about 10%. Any deal would need their blessing.

Bestway’s move is considered by some as demonstrating ongoing investor takeover interest in UK supermarkets, after the £7bn takeover of Morrisons by the US private equity firm Clayton Dubilier & Rice in late 2021, and the sale of Asda by the US retailer Walmart to the billionaire Issa brothers and the private equity firm TDR Capital.

Sainsbury’s currently has a 15.7% share of the UK grocery market, according to retail analysts Kantar, and recently reported successful Christmas trading, where its sales grew 7% from a year earlier.

The retailer said it had benefited from customers splashing out on Christmas dinner, as well as strong sales at the Argos chain it owns.

Bestway was founded in 1976 as a wholesale supplier by Sir Anwar Pervez, which the 87-year-old billionaire still chairs, and has become one of Britain’s biggest wholesalers, serving thousands of retailers.

The company can trace its origins back even further, to the convenience store Kashmir opened by Pervez in Earl’s Court, west London, in 1963, just a few years after he left his native Pakistan for Britain, going on to carry out a range of jobs including as a bus conductor in Bradford.

Bestway also owns the Well Pharmacy chain, which it bought from the Co-op in 2014. The company employs 28,000 people across the UK, the Middle East and Pakistan, where it has a stake in one of the country’s largest banks and its second-biggest cement manufacturer.