Qataris said to be circling Sainsbury's

7th Jul 2010 11:10

Supermarket chain J Sainsbury is up at a two-month high Wednesday on growing speculation that former suitor, the Qatar Investment Authority, is stake building.Talk is the Qataris are ready to up their interest in Britain's third-largest food retailer to 29.9% ahead of a cash offer pitched at 500p a share.They haven't been that high since a £10.5bn 600p a share bid from the QIA collapsed in November 2007 following issues with the pension fund and debt."The Sainsbury business model has developed further since the QIA walked away in November 2007 and the investment authority's justifications for an offer "still hold today," RBS analyst Justin Scarborough said. "Speculation of a bid should refocus investors attentions back to the sector and its low valuations."Jonathan Jackson at Killik Capital is surprised that the rumours are circulating again. Since 2007, sterling has depreciated by 25% against the dollar, making UK assets more attractive to an overseas buyer, he says."Given that the QIA still holds a 26% stake in the company, we are not surprised that the takeover speculation has reemerged.""Although we have no visibility over whether a bid will occur, we would point out that an investment in Sainsbury has merit on fundamental grounds as highlighted in our recent note."