Hedgies demand cashback from UK supermarkets

Michael Bow
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BRITAIN’S biggest supermarkets are coming under pressure from a US hedge fund to split their vast property empire to drive up value for shareholders.

Morrisons, Tesco and Sainsbury’s are all being asked to replicate a model used by one of Canada’s largest supermarkets, Loblaw Companies, to put some of its property into a real estate investment trust (Reit) and offer shares in it to squeeze more money out of the firm.

US hedge fund Elliott Management, led by veteran investor Paul Singer, has taken a small stake in each of the supermarkets and is thought to be leading calls for the change in strategy.

Loblaw saw its share price spike 24 per cent on the day it announced plans for a Reit while the shares it now owns in newly floated venture have increased by eight per cent.

Morrisons is set to reveal in March what it intends to do with its property portfolio as part of a six-month long review into its finances.

There are currently 30 Reits listed in London, with a combined market cap of about £31bn, but the introduction of supermarket Reits would dwarf this.

The three supermarkets’ property holdings are worth nearly double at about £60bn. Their market cap is worth much less at £38.6bn.

Elliott did not comment while Sainsbury’s, Morrisons and Tesco all declined to comment.