No Plan B, so the knives are out at Sainsbury's

One minute, a company can be cruising along, conquering its market, making fat profits. The next, bang! Through no fault of their own, customers, staff and shareholders are left wondering what on earth is going on.

This is the recent experience of those souls tied up in Citigroup and Merrill Lynch. A crisis that has been unfolding for months claims their chief executives and it is obvious that neither of these giant corporations has a scintilla of succession planning.

It's the same here, with Sainsbury's. A takeover saga ends abruptly when the Qatari bidders pull out. Immediately, Sainsbury's shares plunge, and look likely to stay down for some time. What is apparent is that the store group's management has no Plan B. Nothing at all.

Attention focuses on Robert Tchenguiz as the major loser. The flamboyant investor had piled into the supermarkets chain in the expectation that if the deal went through, he would pocket a fortune. But instead he lost one - about £200 million to be precise - as talks collapsed.

Tchenguiz, though, is far from being the only person to suffer. Sainsbury's is owned by a clutch of shareholders. Tchenguiz has 10%, the Qataris hold 25%, the Sainsbury family has 16%, hedge funds and the risk arb people are in for 30%. The only long-term traditional institutional stockholders are Legal & General with 4.5% and Barclays Global Investors with 3%.

The bulk of the share register, then, is made up of a small group of people who are extremely disappointed. They also have every right, the Qataris included, to wonder what now?

Far from supposing that he can relax a little, chairman Philip Hampton now finds himself having to pacify powerful, determined investors. As one nightmare has receded, so another has just started.

In the Tchenguiz camp, it is clear that, far from being down, the mood is surprisingly upbeat - but resolute.

Tchenguiz believes doing nothing isn't an option for the Sainsbury's board. The point is made firmly that he and the Qataris in the shape of Paul Taylor's Delta Two investment vehicle, which the Gulf nation was backing, are sitting on losses totalling £1 billion.

Delta Two and Tchenguiz have no intention of selling but will stay to push for change and a profit on their outlay. "They will get activism on their hands if they don't deliver what we want" is the direct message.

What that means, it is said, is evidence of concerted action. Talking is not enough. "It is not an option for us to sit and listen to waffle," is the line. A share buyback would have to be on the cards. The example of Marks & Spencer, where Stuart Rose has unveiled such an initiative, is cited. "If they believe the shares are undervalued they should borrow money and buy the shares back. If they don't believe they're undervalued they shouldn't be there."

But that is unlikely to suffice. Taylor and his Qatari friends and Tchenguiz were attracted to Sainsbury's by the prospect of realising the moneymaking potential of its vast property portfolio.

The properties are worth £8.6 billion which is only slightly less than the value of the whole group. That doesn't make sense as it implies the operating company is virtually worthless.

There is another group that Hampton and Justin King, the chief executive, must move to assuage. If the Qatari offer had gone ahead, the company's top 1000 managers would have been able to cash in their four-year incentive plans next year - 12 months early.

Many had already mentally spent the money. Now they find themselves having to wait until 2009. Telling them to work harder for the great Christmas push is not going to soothe them.

Too late in the day, Hampton and his senior colleagues have a lot of thinking to do.