Royal Mail boss ready to take charge at Sainsbury's

Allan Leighton, chairman of the Royal Mail and former Asda boss, is ready to take control of supermarket chain Sainsbury in the event of a takeover bid.

It is understood that Mr Leighton, who worked alongside Archie Norman to revitalise Asda during the 1990s – has been approached by the private equity consortium working on bid plans and has told them he is keen to work with them.

His final decision is believed to hinge on what potential bid price they arrive at. He is unwilling to get involved if the price required to buy Sainsbury’s is more than 550p, as it would starve the supermarket chain of the investment funds he believes are necessary.

If there was a successful bid it would reunite Mr Leighton with Sainsbury’s chief executive Justin King. Mr Leighton hired Mr King at Asda and provided a reference for him when he joined Sainsbury two years ago.

It is also understood that Archie Norman is ready to weigh in. Mr Norman is currently a special adviser for investment bank Lazards, which is financial adviser to the private equity consortium – made up of Blackstone, KKR, CVC and Texas Pacific .

Mr Leighton has been at Royal Mail since 2002 and his contract comes to up for renewal in March 2008.

He unveiled his financial restructuring plans for the business today – and he could view that as a suitable point to move on to a new challenge.
There is also increasing speculation that Marks & Spencer is mulling a potential counterbid for Sainsbury.

Retail analyst Richard Ratner at Seymour Pierce said that while his initial reaction was that the possibility of a counterbid from M&S was “pie in the sky” it would be wrong to dismiss it out of hand.

The two companies combined could make considerable savings in head office costs and in buying. The M&S ranges would also strengthen Sainsbury’s position in the higher-margin non-food area, where it lags well behind Tesco.

Mr Ratner estimates that savings could be as high as GBP300m in the first year but points out that the deal would almost certainly be referred to the Competition Commission.

Shares in Sainsbury’s were trading 5.25p lower at 1.30pm while Marks & Spencer was 9.5p lower at 704p.