Do Sale and Leasebacks Add to Shareholder Value or Detract from it?

Natalie Hayward

ERES from European Real Estate Society (ERES)

Abstract: Three sale and leaseback deals including two from Sainsbury's and one from Tesco are analysed from the point of view of their impact on shareholder value. These deals combined raised £1.2 billion. Event study methodology was employed to determine if abnormal returns could be found following the sale and leaseback announcement. These results were analysed for statistical significance. These three transactions were also studied from the standpoint of shareholder risk as represented by changes in equity Beta following the deal announcement. Finally from a balance sheet perspective changes in net operating profit after tax were analysed for indications of shareholder value or erosion before and following the announcements. Of the three deals studied only one showed positive abnormal returns, which were found to be statistically significant. One of the other two was found to demonstrate statistical significance for negative abnormal returns. Results for the third deal were not statistically significant. These results are discussed within the context of the firm's balance sheet positions prior to and following the sale and leaseback. Where shareholder value was found to be growing, sale and leaseback announcements appear to be viewed more favourably. However where shareholder value erosion is taking place the market does not appear to view a sale and leaseback as sufficient to reverse the trend.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2005-01-01
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