Sainsbury gets takeover approach from Qatar

By Mike Elliott

LONDON (Reuters) - Gulf Arab state Qatar has made a bid approach for J Sainsbury Plc, which newspapers said valued Britain's third-biggest supermarket group at about 12 billion pounds ($24.5 billion), including debt.

Sainsbury confirmed the approach in a statement on Wednesday, but gave no indication on the price of the proposal, which comes just three months after Sainsbury family members blocked a 10.1 billion pound takeover attempt by private equity firms.

Newspapers said Qatari investment fund Delta Two, which already owns about 25 percent of Sainsbury, was prepared to offer 610 pence a share for the rest of the company.

State-owned Delta Two confirmed it was in preliminary talks with the supermarket group about a possible cash offer but said no decision had yet been made.

The Qatari fund is run by Paul Taylor, a former employee of property tycoon and Sainsbury shareholder Robert Tchenguiz, and invests in businesses with strong management, leading market positions and long-term growth opportunities.

"All of these criteria are met by Sainsbury," Taylor said in a statement.

Sainsbury's stock was up 1.4 percent at 593.5 pence by 1000 GMT, outpacing the DJ Stoxx index of European retailers, which was down 0.4 percent, and valuing the company's equity at around 10.3 billion pounds. It also has debt of 1.5 billion.

A source familiar with the situation said the Qatar approach was "friendly and supportive" and not connected with Tchenguiz, who is said to hold a stake of about 10 percent in Sainsbury.

"We believe the takeout price could be significantly higher than this (610p)," Numis analysts said in a note. "In our view Sainsbury is an attractive investment opportunity, and we are today raising our target price to 700p."

WILL FAMILY ACCEPT?

Shares in Sainsbury had stood at about 445p before news of a possible bid emerged in February, which resulted in a 10.1 billion pound or 582p a share approach from a private equity consortium led by CVC Capital Partners Ltd, ultimately blocked by the Sainsbury family.

The Financial Times on Wednesday quoted people close to the situation as saying the family, which owns around 18 percent of the business, did not support the proposal from Delta Two.

However, Seymour Pierce's Richard Ratner said in a note: "The members of the family may well roll over" for what he described as a "huge price" proposed by Delta Two.

"Moreover, even without the family's outright support, the Qataris, not being private equity, might launch an offer."

One trader said Sainsbury might well accept. "The bottom line will be the family ... I fancy the family will take 625 pence, and I think that's what (Delta) have got in the tank."