Amazon AMZN founder Jeff Bezos could save thousands of jobs at struggling British supermarket Sainsbury’s and stop the much loved 151 year-old UK brand from going bust due to COVID-19.
Mr. Bezos, 56, best known for his appreciation of books and newspapers, has been trying to find the Holy Grail of online grocery shopping for 23 years.
US organic brand Whole Foods WFM was founded forty years ago and was bought by Mr. Bezos for $13.7 billion in 2017. It has thrived globally under the Amazon founder’s gaze, with the workforce going from 89,000 team members in 2017 to 91,000 employees in 2020.
But Whole Foods and its parent Amazon is facing the same pressures as other large companies in the COVID-19 era, including tax pressures from EU countries and anti-trust proceedings in the US.
In 1869, John James Sainsbury opened his first grocery shop on London’s Drury Lane. Now in 2020, The Edge believes Sainsbury’s best bet is to be taken over by a person who cares about its survival, either someone like Mr. Bezos or an activist investor to help them to thrive once again. The Edge Sainsbury’s Special Situations Full Report is available on request here.
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If he bought Sainsbury’s, Mr. Bezos could settle his beef with Donald Trump and the US Postal Service once and for all in the spat being dubbed “The Battle for Georgia 2020.”
It is said Mr. Trump has no intention of giving up and Mr. Bezos has found himself smack bang in the middle of the US Presidential Trump vs Biden Election of 2020 and will play a huge part in deciding the outcome of it.
If Mr. Bezos buys Sainsbury’s and Joe Biden becomes US President, he can offer to become involved in the Good Friday Agreement negotiations in time for the December 31, 2020, Brexit final deadline.
Mr. Bezos could ensure Sainsbury’s survival (as he did with Whole Foods) at the height of the dog-eat-dog world of British supermarket shopping wars created under EU membership rules.
Now the UK is heading for a smooth exit from the EU, and an investor could secure the pension deficit of Sainsbury’s 111,900 employees, restructure the business, and help it get better before things get any worse.
Time is of the essence because US Presidential Candidate Joe Biden and his supporters are angry at President Trump, who is refusing to concede.
But Mr. Biden insisted on November 7 that, “Every vote must be counted,” and has been announcing plans and talking to world leaders ever since.
Mr. Biden, who picked a team of made up of former Obama and Clinton staffers, made a victory announcement on November 8 from a website with a temporary Washington agent’s address, which takes you to © 2020 Team Joe Store.
Prime Minister Boris Johnson spoke with President-elect Biden of the United States November 12 to congratulate Mr. Biden on his election victory as President-elect of the United States, but that was perhaps premature.
Meanwhile Democrats are raising funds to fight in the battle of Georgia against Mr. Trump, who is refusing to concede until every vote is counted, just as Joe told voters would happen.
Trying to force Mr. Trump to acquiesce from a battle to stop the count is pointless, it’s said. A source said: “Mr. Trump believes stopping the count would be an unmitigated disaster for US democracy and even more so the US Constitution.”
Democrats are becoming more convinced they are in a similar situation to the December 2000 Supreme Court decision in Bush v. Gore in Florida that made George Bush President.
Five Points to Consider In An Amazon (AMZN) Acquisition of Sainsbury’s
1. In order to increase its footprint in groceries and brick & mortar business, in June 2017, Amazon (AMZN) acquired Whole Foods Markets for $13.7 billion. At the time of the acquisition, Whole Foods Markets’ LTM EBITDA stood at around $1.3 billion, giving the implied multiple on the Amazon / Whole Foods deal at about 10.4x LTM EBITDA.
2. Sainsbury’s (SBRY) LTM EBITDA numbers stand at around £2.2 billion. If AMZN goes for an acquisition of the supermarket and groceries chain at the same multiple as Whole Foods Markets’, at 10.4x LTM EBITDA, the deal for SBRY comes to around £23.01 billion. Adjusting for net debt of £4.95 billion, that implies a market value of around £18.06 billion for SBRY. With the current number of outstanding shares (2,234 million), the per share acquisition price comes to around GBp808.64, a 308.7 percent upside. Consider AMZN gets to bargain with a 50% discount to the deal multiple (i.e. 5.2x LTM EBITDA), that yields a deal price of ~GBp293.64, a 48.4 percent upside.
3. In the UK, AMZN already has a supply chain partnership with SBRY peer WM Morrison Supermarkets Plc (WMR), which AMZN partnered with in 2016 to deliver fresh and frozen groceries to its customers. That makes WMR an ideal candidate for an acquisition target. However, with the ongoing underperformance, Sainsbury’s is available at a comparatively cheaper valuation. SBRY currently trades at 4.7x FY21E EV/EBITDA multiple at a discount compared to WMR’s 6.5x, making it a more lucrative acquisition target for AMZN. And once the restructuring exercise undertaken by SBRY starts bearing fruit, AMZN is bound to gain from improved operational efficiencies at SBRY in the coming years.
4. At 10.4x LTM EBITDA, SBRY’s acquisition price comes at around £23.01 billion or $30.498 billion (1 GBP=1.33 USD). As per Amazon’s latest filing, it had $55.02 billion in cash and marketable securities and around $23.4 billion in debt. With net cash of around $31.6 billion, AMZN would not have any financial struggle in acquiring SBRY in the current form.
5. In 2019, AMZN held around 30 percent share of UK’s Ecommerce market (considered as the third highest market globally) as per global ecommerce insights firm Edge by Ascential. AMZN has been eyeing to increase its presence with physical stores, as shown by the Whole Foods Markets brick-and-mortar stores acquisition. Acquisition of SBRY, when it is trading at the cheapest valuation compared to other UK listed supermarket retailers, can work as a comparatively cheaper deal and perfect footprint enhancer for AMZN in the UK.
The Edge has run the numbers in the recently updated Sainsbury’s Special Situations report, with some of the details of the report included within this article. It is available on request, please contact us here.