Takeover speculation sends Sainsbury's shares soaring

SHARES in Sainsbury's soared by more than 20 per cent at one point yesterday, after the supermarket giant became the focus of renewed takeover speculation for the third time in as many years.

Traders reported talk of an offer from the Qatari Investment Authority (QIA) – one of Sainsbury's biggest shareholders – at 420p a share, which would value the chain at about £7.7 billion.

Such an offer would be well below QIA's 2007 bid for the group, at 600p a share.

Any offer would need to win the support of the Sainsbury family, which owns about 15 per cent of the business.

The QIA sovereign wealth fund took a 26 per cent stake in the retailer more than two years ago through investment firm Delta Two.

Sheikh Hamad al Thani, the QIA's chief executive, is the prime minister of the oil-rich state and a member of the Qatari royal family.

Market chatter suggested that the fund was looking to up its stake in the supermarket operator, which was likely to lead to a full-blown takeover offer.

A Sainsbury's spokeswoman said yesterday: "We do not comment on market rumour or speculation."

Delta Two unveiled a £10.6bn takeover proposal in July 2007, but the plan was scuppered by rising financing costs in the early stages of the credit crunch and the failure to agree a funding deal with the trustees of the group's pension fund.

The attempt had followed a previous takeover bid by private equity firm CVC at the height of the buy-out boom, which also foundered because of opposition from the trustees.

Nick Bubb, a retail analyst at Pali International, yesterday said: "A full bid with the family supporting it seems unlikely. The Qataris topping up their stake is more likely."

Shares in Sainsbury's closed up 10 per cent, or 31.4p, at 342.5p last night. The sharp rise in Sainsbury's shares comes after a week in the doldrums following a trading update last week.

The firm said it performed well in "what remains a challenging consumer environment", but it warned that growth would slow in the future as inflation eased.

Like-for-like sales during the second quarter rose by 1.3 per cent, while the chain said it was recording more than 18.5 million transactions each week, up by 800,000 compared with the same period in 2008.