While nothing has ultimately happened, things will not be the same. Private equity’s abortive offer for Sainsbury’s will have profound repercussions for the company, the retail sector, the private equity industry and the public markets. As everyone moves on, it is already clear that there have been winners and losers in this battle. The losers are:

1) Obviously, CVC. Not only has it missed out on tens of millions of pounds in management fees, but it must have hoped that by cutting in the big US private equity funds on what would have been Europe’s largest leveraged buyout, it would start getting cut in on big deals in the United States and Asia.

2) The club deal. The unravelling of the CVC team — and the reported tensions within the quartet of TPG, Blackstone and KKR — have highlighted the different priorities and inevitable tensions for four private equity firms purportedly pursuing the same goal.

3) The analyst community. Ten weeks ago, Sainsbury’s was priced at just over £4 and the analysts almost universally deemed it a “sell”. This week, the 582p offer was judged a steal and private equity was rebuffed for seeking to buy the company on the cheap. People will ask: are analysts a waste of time?

4) The Takeover Panel. The arbiter of the public markets acted quickly and effectively at the beginning of the process, but, towards the end of the story, it allowed the negotiations to continue back and forth for six days without a statement to the markets.

5) Justin King. Looking back, questions will continue to swirl about the contact that the Sainsbury’s chief executive may have had with the private equity bidders before their interest became known to the public. Looking ahead, the Sainsbury family has refused to consider a sale for anything less than £6 a share. Mr King has been set a testing performance target.

On the other hand, the winners are:

1) Also, Justin King. The chief executive’s shares in the company, his options and his incentive plan means that even without the bid going through he is many millions richer.

2) All the other shareholders in Sainsbury’s. The investors may not have got a full pay-out at 582p per share, but they have seen a rerating of the company. The stock may slip, but it will not slide back to where it was.

3) KKR. While the Sainsbury’s bidding consortium suffered from first mover disadvantage, one private equity firm quietly got on with a £10 billion bid of its own. KKR will have made no friends with its fellow bidders for Sainsbury’s, but it is close to getting its own deal away with AllianceBoots.

4) Sir Philip Hampton. The Sainsbury’s chairman did not pull off the deal that he, perhaps, expected to, but he kept the board and the executive team together, maintained good relations with the bidders and avoided a face-off with the family.

5) Lord Sainsbury of Turville. David Sainsbury has exerted the power of his shareholding, as well as the sway of the family name. The former chairman, who appeared to have left the corporate scene for a life of politics, science and philanthropy, has re-emerged as a powerful force in the company.

Nothing happened, but ten weeks on, Sainsbury’s is again a family-controlled company.

Corn will not save the planet

America’s new “green” revolution aims to replace imported mineral oil with petrol made from renewable crops. It is a laudable aim, but it cannot defy that basic law of nature, life and economics: there is no such thing as a free lunch.

The drive to distil more ethanol is intended to exploit US agriculture’s seemingly limitless capacity to deliver the corn that is preferred as feedstock for the country’s multiplying ethanol distilleries. But the prairies’ capacity is not infinite. So repercussions of the doubling of demand are already being felt.

Corn prices have soared to their highest in a decade, pricing it out as feed for marginal producers of beef, pork and poultry. So US meat production is turning down. Domestic prices are expected to rise, diverting supplies from, ever-rising US exports. The world price will rise, too: good for farmers and campaigners against hamburgers, bad for poor consumers.

Farmers are responding to high prices by planting 15 per cent more acres with corn. Other crops are bound to suffer unless land is taken out of the conservation reserve, an anathema to environmental groups, who see more planting and fertilizer polluting and lowering the water table. Soya bean and rice acreages are being cut, as is cotton in the South. US food prices are set to rise 3 per cent this year.

Lower subsidised cotton exports should be healthy for global trade, but there is not much hope of lower cereal and meat production being good for American waistlines. There are plenty of others ready and willing to supply the missing beef, corn and soya to feed the world.

Farmers along the frontier of Brazil’s Amazon rainforest are already planting more corn and soya to fill the gap, even though they take up more land than sugar. Burning of Amazon rainforest, mainly for large-scale beef and soya production, was identified in the Stern report as the worst single source of carbon emissions. Honest efforts to combat global warming may thereby accelerate it. Ecology is complex. But it would be a lot easier if Americans drove cars that used less petrol.

Lion’s share

Singapore has long been famous for the salaries it offers civil servants. While other capitals in Asia have struggled with corrupt civil servants and jobsworth bureaucrats, the Lion City has boasted that competitive pay has enabled its Government to recruit scrupulous, effective executives out of the private sector and into public service.

But Singapore’s state salaries have become ludicrous. Yesterday, Lee Hsien Loong, the Prime Minister, agreed to donate his future pay increases to charity. This is absurd, because it means that the Singaporean taxpayers are being required to fund his charitable donations.

Under the proposed pay hikes, the annual salary of Singapore’s Prime Minister will be $2.05 million (£1.04 million) by the end of 2008, which is five times more than that of George W. Bush and nearly six times more than that of Tony Blair. Ministers’ salaries in Singapore are due to rise from about $790,000 to $1.2 million over the next two years.

Singapore’s argument is that these increases are necessary to keep up with the pay rises in the private sector. This is self-serving, unsustainable and illogical. It enables ministers to justify higher salaries for ministers; it forces the public sector to keep pace with pay increases in the private sector; and, in effect, it rewards government officials for shareholder returns delivered by corporate chief executives.

It also provides a worrying echo of the “keeping up with the Joneses” arguments made by chief executives in the UK for increasing pay to keep pace with their counterparts in the US. Pay should be set by the value of the job being done, not by the value of another job being done by someone else, somewhere else.
james.harding@thetimes.co.uk

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