Friday, 16 February 2007

T&G on the possible Sainsbury's buyout

And here's what the T&G had to say about the proposed PE-buyout of Sainsbury's. This is the story that has really taken the debate about private equity to new levels. There's also an interesting piece in today's FT (16th Feb) from the chief investment officer of Fidelity on some of the problems with private equity.

Private equity would take the wealth out of Sainsbury
5 Feb 2007

Heightened speculation about a private equity takeover of the Sainsbury supermarket chain drew a stinging response from the Transport and General Workers Union.

The union, which has 25,000 members spread over the retail and supply chain, said today that private equity would do nothing for a company which has turned round in the last two years.

"We are very concerned at the prospect of Private Equity taking over Sainsbury's," said Brian Revell, T&G national organiser for food and agriculture. "Such a takeover would be based on borrowed money followed by extracting as much wealth as possible from the company."

Mr. Revell said it was clear from the union's experience and that of unions across the industry in Europe and beyond that private equity companies are only in for the short or medium term and will add nothing to the management of the business. He praised the collective efforts at Sainsbury's and was highly critical of private equity.

"Sainsbury's have dramatically improved their performance over the past two years. This has not been based on a quick fix, but management and the workforce co-operating to improve the business," he stressed. "Private equity does not create wealth; they extract it for their shareholders."

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