Berenberg and UBS are now in agreement that J Sainsbury’s (LON:SBRY) merger deal with Walmart’s Asda almost certainly won’t go ahead, Proactive Investors reports. The comments came after the Competition and Markets Authority (CMA) disclosed its provisional findings yesterday, flagging ‘extensive competition concerns’ over the tie-up and cautioning that it thought it was ‘likely to be difficult’ for the parties to address its concerns.
Sainsbury’s share price, which tanked about 18-percent yesterday, has extended the previous session’s losses, having given up 1.15 percent to 231.80p as of 14:55 GMT. The decline is largely in line with the broader market fall which has seen the benchmark FTSE 100 index lose 1.05 percent to 7,152.70 points so far today.
UBS and Berenberg weigh in
Proactive Investors quoted Berenberg as saying in a note to clients today that the CMA’s expected decision shifted the focus back on Sainsbury’s underlying business, where the analysts had three key concerns. The broker has pointed to inferior top-line momentum relative to peers, weak earnings momentum as Argos synergies dissipate as well as high leverage.
“There is […] a risk that the CMA’s decision could lead to a series of negative events, ultimately resulting in management change, kitchen-sinking and a capital raise,” Berenberg pointed out.
Proactive Investors also quoted UBS as commenting that Sainsbury’s “standalone organic growth story is now uninspiring”, while recent like-for-like sales had been ‘lacklustre’.
Analyst ratings update
JPMorgan Chase & Co, which is ‘underweight’ on Sainsbury’s, lowered its price target on the stock from 230p to 190p yesterday, while HSBC, which sees the blue-chip grocer as ‘reduce,’ trimmed its valuation on the shares from 230p to 190p. According to MarketBeat, the blue-chip supermarket currently has a consensus ‘hold’ rating and an average price target of 280.50p.
As of 15:08 GMT, Thursday, 21 February, J Sainsbury plc share price is 232.80p.