Is talk of a takeover pushing Sainsbury’s shares to new highs?
Shares in Sainsbury's have been up 2% in the last 24 hours as takeover speculation builds. With hedge funds buying up debt swaps, Sainsbury’s shares have reached a 12-month high and the bull run may only just be starting.
- The Sainsbury’s share price hits 12-month high
- Will Covid-19, falling revenue, and debt hurt Sainsbury’s shares?
- Or could a potential takeover help Sainsbury’s in the long-term share price?
- Want to trade Sainsbury’s shares? Open an account today
The Sainsbury’s share price (SBRY.L) opened at just under 250p on 26 January. Within the hour, the price per share was touching 253p. Analysts are currently maintaining a hold rating, but that could change if speculation turns to talk. Much of the recent buzz surrounding Sainsbury’s comes in the wake of Asda’s change of personnel.
Takeover trend could boost Sainsbury’s shares
The Issa brother’s £6.8 billion takeover in October 2020 may have signalled the start of a new trend in retail. With Covid-19 restrictions forcing brands such as Sainsbury’s to adapt, those at the top are looking for new opportunities. Indeed, despite a surge in grocery sales, Sainsbury’s profits for 2020 were down 44%. Increased costs and a pledge to pay back £410 million in business rates relief put the grocer on the backfoot at the start of 2021.
However, with hedge funds currently scrambling to purchase debt swaps, the Sainsbury’s share price has gained momentum. It’s not clear who or even if a takeover bid is going to happen. However, Sainsbury’s shares have risen from 230p on 29 December to a peak of 253p this week. Tracking back further, shares are now up 24% over the last year (204p to 253p). Wall Street analysts recently set an average 12-month price target of 225p. Given the latest price and current trend, this could be beaten.
Can a deal help the Sainsbury’s share price in the long term?
Indeed, Canada’s Alimentation Couche-Tard is currently sizing up takeover targets. The convenience store operator recently had a £14 billion move for French supermarket Carrefour blocked. If Alimentation Couche-Tard is still in the market for a viable target, Sainsbury’s could be it.
Any deal would have to be approved by the Sainsbury’s family and Qatar’s sovereign wealth fund. That could prove to a stumbling block. However, with the Issa brothers finding a way to buy Asda, the market may be ripe for another creative takeover deal. It’s this speculation that could be fuelling the recent surge.
The question now is whether it will run out of steam before a serious offer is put on the table. Covid-19 restrictions will continue to hamper the retail section in 2021, and that could impact the share price. But, if there is a deal to be done, it could offset these issues. The question, therefore, is can Sainsbury’s shares continue to rise in the medium term, and will a takeover provide a long-term boost for the company?
Do you think a takeover will boost Sainsbury’s shares?
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