Sainsbury (J) (SBRY) mortgage business could fetch £1.3bn if the grocer finds a buyer. The supermarket chain is in talks with advisers as it explores a sale of its mortgage book. A review of the company’s financial services arm was kick-started by Martin Scicluna after he joined as chairman last November. The Sunday Telegraph revealed last week that the supermarket chain was examining a major overhaul of the bank as it prepares to lay out a new strategy to City analysts and investors on Sept 25. Tesco bagged £3.8bn for its mortgage book from Lloyds earlier this month, just £100,000 more than its actual value. An industry source, however, said that Sainsbury’s could struggle to sell because its costs are too high, something the supermarket chain rejects. Sainsbury’s, led by chief executive Mike Coupe, is under pressure to get back on the front foot after its merger with Asda was knocked back by competition watchdogs in the spring. Sainsbury’s Bank has been weighing on the supermarket chain’s profits and consuming cash for years. It made a loss of £34m last year, compared to a profit of £25m the year before.
The Hong Kong stock exchange is set to go hostile with its £30bn bid for the London Stock Exchange Group (LSE) after its offer was rejected on Friday. LSE said earlier it had concerns about the key aspects of Hong Kong Exchanges and Clearing’s (HKEX) proposal, which had “fundamental flaws” around its structure and value. Hong Kong quickly fired back, arguing that the proposed deal represented “a highly compelling strategic opportunity to create a global market infrastructure leader”. HKEX bosses said they hoped to enter into a “constructive dialogue” with the LSE board and were “disappointed” that it had “declined to properly engage”.
Ovo Energy is buying SSE (SSE) retail business in a £500m deal that will make it one of Britain’s biggest energy businesses, but the founder of the challenger company has refused to rule out job cuts. Set up just a decade ago, Ovo supplies 1.5m households with electricity and has 2,000 staff. It will take on another 3.5m customers and 8,000 staff from SSE. In total it will have about 6.5m accounts, with some customers having more than one account. The acquisition will make Ovo the UK’s second-largest energy company, beaten only by British Gas.
FirstGroup (FGP) is poised to offload part of its bus business to its own managers amid mounting industry concern of a shake-up by politicians. A string of management buyouts are said to be the frontrunners vying for First’s bus operations in Bristol, Dorset, Devon and Cornwall. A similar swoop by managers is also being pulled together in East Anglia. First put its entire UK bus arm up for sale earlier this year alongside North American coach arm Greyhound, following pressure from its biggest shareholders. The largest of these, activist Coast Capital Management, launched a campaign over the summer to oust half of the board. While Coast failed to attract majority shareholder support, First’s chairman and two other directors would later step down. Some investors want the company to also exit UK rail and concentrate on more profitable operations in the US.
Two of Britain’s biggest road builders are hurtling towards a £250m legal showdown with the taxpayer over one of the contracts that broke Carillion. Balfour Beatty (BBY) and Galliford Try (GFRD) have until December to strike a deal with Scottish highways authorities over the construction of the Aberdeen bypass or else issue legal proceedings under the terms of the contract. Industry analyst Stephen Rawlinson said: “I can’t see why either party would want to settle.” The Aberdeen Western Peripheral Route was supposed to cost £745m but quickly spiralled out of control with the final bill well in excess of £1bn after series of delays. It was originally contracted to Balfour Beatty, Galliford Try and Carillion. The two companies took on commitments left by Carillion after it collapsed in January 2018. “That particular venture could have put Galliford Try out of business,” said Galliford Try boss Graham Prothero, adding that the claim against Transport Scotland “would be in the hundreds of millions”. “You’d rather negotiate,” he added. “[But] we’re realists and it may have to go through the legal route.” A Transport Scotland spokesman said: “The cost of the project remains at £745m. To date, Aberdeen Roads Limited has yet to provide sufficient evidence to substantiate its claim.”
Questor: despite tough markets, there should be more in the tank for Inchcape (INCH). Hold. Questor share tip: the car distributor is redirecting its cash to where returns are best, while there is a decent 4% yield
