Sainsbury’s is believed to be the latest retailer attracting overseas investment attention in what has been a busy year for international deals.

Sainsbury's

Why are we talking about this now?

The Qatar Investment Authority-backed Delta Two fund is thought to have hired advisers to discuss building on its 26% holding in Sainsbury’s. A potential deal has been speculated about several times before. Delta Two first considered a bid for Sainsbury’s in 2007 when it proposed a £10.6bn offer.

Which retailers have overseas investors bought into lately?

Last month French toys giant Ludendo, which has more than 300 stores in France, Belgium, Switzerland, Spain and Morocco, acquired Hamleys for an undisclosed sum. International investors have also stepped in to turnaround businesses in 2012. Clintons’ supplier American Greetings acquired the retailer’s debt and took control of it in June, while Aquascutum’s Asian licensee YGM Trading bought the retailer out of administration for £15m in May. Conlumino lead consultant Matt Piner says: “There was a phase when lots of overseas retailers came to the UK but now foreign investors have realised that it is more simple and effective to take a stake in an existing UK retailer.”

Why are overseas investors interested in British brands?

Ludendo chairman Jean-Michel Grunberg said that the French business had “utmost respect for the Hamleys brand and heritage” on inking the deal last month. Piner says: “British brands have a strong heritage and that is appealing for potential investors.”  

What are the pitfalls?

For UK retailers, uncertainty in investors’ domestic markets can be a problem. The failure of Icelandic investment giant Baugur in 2009 caused problems for UK retailers in which it had holdings. Conversely, US giant Dick’s Sporting Goods rapidly lost the £20m it invested in JJB Sports earlier this year, which observers believe was down to Dick’s lack of knowledge of the UK sports retail market, which is dominated by Sports Direct. Poor consumer spending also continues to take the shine off the UK’s appeal. 

What would be the potential consequences of a Sainsbury’s deal?

Piner says overseas investment can fuel international expansion. “Sainsbury’s is still growing in the UK but food is a mature market and the main growth opportunities are overseas,” he says. “British brands are popular in the Middle East and a Qatari deal would allow Sainsbury’s to expand internationally.”