Sainsbury's shares soar as bid talk grips City

Shares in Sainsbury's rocketed nearly 20% today amid feverish speculation that a £8 billion takeover bid was winging its way from Middle East.

The City rumour mill said the Qatari government's investment fund, which already holds a 26% stake in the business, was looking at launching a bid.

Talk in the market was that Britain's third-biggest supermarket, run by chief executive Justin King, was back in play, having survived two separate takeover attempts in 2007.

Those talking up the story said the bid would come in at 420p a share. At their peak this morning, the shares shot up as high as 373p before settling up 39p at 350½p.

Speculation had it that former Barclays deal supremo Roger Jenkins was acting as the Qataris' adviser.

Investors licked their lips at the thought of a deal, although cautious heads recalled how previous bids have foundered. The Qatari Investment Authority (QIA) last supported a bid two years ago through the investment firm Delta Two.

The offer was priced at £10.6 billion but was scuppered by the difficulty in raising cash for the deal due to the onset of the credit crunch.

Other analysts speculated that the Qataris could be looking to increase their stake in the business with a view to capitalising on the relatively low share price.

Traders said the speculation was gaining legs because of the renewed strength of the stock market and hopes that takeover activity could be back on the agenda again. Kraft's takeover approach to Cadbury has been seen as a sign that the big deals could be returning, despite mining giant Xstrata's decision to drop its merger plan with Anglo American this morning.

A flurry of multi billion dollar takeover deals have swept through Wall Street in the past month, mostly in the technology and pharmaceuticals areas.