Lord Sainsbury sells £150m stake

THE City was back on bid alert as Sainsbury's fourth-largest shareholder offloaded a large chunk of stock in the embattled retailer. The Gatsby Charitable Foundation sold 45m shares, or 2.6%, of the company. It netted £130m - around a third of which will be used to fund a new science lab at Cambridge University.

The Foundation is the primary charitable trust for Science Minister Lord David Sainsbury and the share sale takes his holding in the group down to 21% from its original 2%.

When he entered Government, Lord Sainsbury's stake was placed in a blind trust run by the solicitor Judith Portrait. But the suspicion is that he may be ready to relinquish his ministerial responsibilities to mastermind the sale of the company.

Former Asda pair Archie Norman and Allan Leighton are said to be circling the UK's third-largest food retailer and it is also thought to have attracted interest from private equity group Permira, France's Carrefour and Bhs owner Philip Green.

Sainsbury is understood to be so worried about the prospects of an unwelcome £5bn bid that chief executive Justin King hired US investment bank Morgan Stanley to put together a defence. It also issued Section 212 notices under the Companies Act to establish who has been buying its shares.

The shares sale yesterday is something of a volte-face for the Gatsby Foundation. Back in October trustee Andrew Cahn said the organisation was not a seller.

Since those comments the value of the company has shot up 14%. 'It has outperformed the market on rumour and speculation rather than on a fundamental recovery,' said Panmure Gordon retail analyst Justin Scarborough.

Commentators are split on the significance of the stake sale. Traders took it as evidence that bid interest is on the wane. They reckon Portrait, who is one of the Gatsby Foundation's trustees, would never have sanctioned the deal if a takeover at 300p-350p a share was imminent.

A takeover of Sainsbury would take a considerable amount of time and effort to pull off.

While Lord Sainsbury - great grandson of the founder John - remains the most powerful figure, cousins John, Simon and Tim wield considerable influence. Between them they own around 13% of the retailer. Getting the whole clan to agree a deal could prove an organisational nightmare.

Swiss bank UBS offloaded the stock at a price of 289½p and placed it with 'various institutions', rather than with one buyer.

The 45m shares represent around half of the Gatsby Foundation's holding in Sainsbury. It is using some of its new-found wealth to donate £45m to a new institute for plant diversity at Cambridge University.

Created in 1967, it has given away about £400m to good causes. They include technical education, scientific research, disadvantaged children and local economic renewal as well as grants to the arts.