Whether or nor the government of Qatar will finally own J Sainsbury, its reputation as a credible financial investor has been badly damaged.
The Gulf state’s investment authority has held the supermarket group, thousands of its employees and the UK capital markets hostage for more than three months and shareholders are not impressed.
The idea that Qatar is concerned about paying an extra £500m of equity on top of the £4.8bn already committed, is absurd.
This amounts to less than 10 per cent of the value of the bid and any experienced player knows that most take-privates require an additional slug of cash at the end to seal the deal.
Increasing the proportion of equity by £500m would mean only a marginal difference in Qatar’s projected internal rate of return – say 14 per cent, rather than 15 per cent. What’s more, about 75 per cent of the value of Sainsbury is in its property – a low-risk investment.
Qatar’s ability to play the international M&A game contrasts starkly with that of its regional neighbour Dubai, which has shown it is an efficient and reliable buyer of western assets.
Dubai Holding, which oversees Dubai International Capital, has pulled off several high-profile deals during the past 18 months in a highly sophisticated manner, including buying stakes in HSBC and Madame Tussauds.
Qatar, on the other hand, tried to buy Thames Water last year, but was beaten by Macquarie Bank of Australia.
Qatar’s defence was it wasn’t willing to overpay, but the reality is that the Gulf state is a takeover rookie and was outmanoeuvred by a smarter and more experienced player.
Dubai Holding does not disrupt public businesses because of its own internal politics. Imagine what shareholders would think of buy-out firms such as Blackstone or CVC if they pulled deals at the last minute because of partner politics?
Western governments and the International Monetary Fund continuously express their concerns about the opacity of sovereign wealth funds and their acquisition of international assets.
But a much more pressing issue is allowing funds such as Qatar’s investment authority to treat blue-chip companies, their shareholders and their employees as amusing playthings for their entertainment.