The man who wants to buy Sainsbury’s

Robin Marriott, Europe Editor of PEO’s sister site, profiles the man looking to buy UK retailer Sainsbury’s – and to succeed where a private equity consortium recently failed.

The last time PERE bumped into Paul Taylor, he was on a luxury yacht in the south of France in 2005, attending the annual MIPIM international property conference.

Taylor was strutting purposefully around the lower decks of the luxury cruiser, which had been hired by property entrepreneur brothers Vincent and Robert Tchenguiz. At the time Taylor was the brothers’ commander-in-chief, as chief executive of their Rotch Property Group.

Gruff, straight-talking, with a touch of actor Ray Winstone about him, he looked like a man not to be messed with. With his open-neck shirt and no-nonsense approach to business, not to mention his acumen for highly-geared structured property finance, he helped the Tchenguiz brothers flourish when they were concentrating on acquiring trophy office buildings with blue-chip tenants.

However, it is a sign of how far he has come since then that at this year’s MIPIM show – which attracts some 26,000 in the property industry – he hired his own yacht for the duration of the event, and laid on songstress Beverley Knight as entertainment.

But the changes do not stop there.

As gatekeeper for Robert and Vincent Tchenguiz, Taylor would often field telephone calls from journalists looking to confirm the latest rumours about one of their property deals. Without being overly helpful, he managed to strike the right balance between clarifying the situation without not betraying confidentiality. More recently the calls are not being returned.

It is no surprise. Since leaving the Tchenguiz brothers’ employ to set up his own investment firm, Three Delta, he has been careering around the marketplace at an even greater pace. He is now working for himself – and more significantly, investing funds on behalf of the State of Qatar.

The relationship with Qatar began at Rotch, where the oil-rich state would often invest alongside the property company on deals. However, when Taylor left, he took the mandate with him to invest further funds in the UK.

Last year Three Delta – named after Taylor’s underachieving class at school – snapped up a care home property portfolio and a special needs education business called Senad. His most significant deal to date has been the acquisition of Four Seasons, Britain’s second largest nursing home company, which was bought from Allianz for €2 billion.

Shortly afterwards, in a typically brief “interview” with the Sunday Times newspaper, he revealed some of his investment strategy. Three Delta is a “value investor”, he told the newspaper. “We are not leaving tomorrow. We want to be seen as the intelligent, quality player in this market,” he said.

But with Three Delta’s latest target he will have to display more than just intelligence.

Until now, he has not had the weight of public scrutiny thrust upon him, nor has he had to woo legions of fund managers in the City, or a powerful family with more than just a return on their investment at stake. In bidding for Sainsbury’s, the question will be whether he has bitten off more than he can chew.

Taylor has reportedly had a series of informal discussions with Sainsbury’s chairman Sir Philip Hampton in recent times, but whether the Sainsbury family dynasty like the cut of his jib is a different matter. The family control 18 percent and were instrumental in defeating the last approach for the company earlier this year, from a consortium led by CVC Capital Partners.

The difference this time, though, is that Three Delta is starting from a much stronger position. Through takeover vehicle Delta Two, Taylor and the Qataris have amassed a 25 percent stake in Sainsbury’s. Helpfully, old ally Robert Tchenguiz owns another 11 percent.

The prospect of comprehensive school-educated and former bricklayer Taylor, Iran-born Robert Tchenguiz and the State of Qatar owning Sainsbury’s may prove to be less than appetising to the Sainsbury family. However, to the purely financially driven shareholders, the background of the prospective new owners is less relevant – especially if they want to retain the services of current chief executive Justin King, as reports are suggesting.

In recent soundbites, Taylor has been putting out the message that his interest in Sainsbury’s is not about property, but about a good long-term operating company.

However, given the relationship between Taylor and Tchenguiz, who has been agitating the Sainsbury’s board to unlock value from its £8.6 billion real estate portfolio, it is hard to imagine that property will not figure significantly in plans going forward.

Real estate and the capital markets financing such acquisitions is Taylor’s backyard. Gruff and short with words he may be, but Taylor certainly knows a good property deal when he sees one. Just ask those who boarded his yacht in the South of France this year.        

(An earlier version of this article previously appeared in our sister publication, Private Equity Real Estate magazine)