Royal Mail boss eyes Sainsbury

ALLAN Leighton, former boss of Asda and now chairman of Royal Mail, is poised to make a dramatic £5bn bid for Sainsbury. He has funds in place to make a move within weeks.

Leighton is believed to have approached the Sainsbury family, who hold a crucial 35% stake in the group.

He believes that three former Asda colleagues, Justin King, now Sainsbury chief executive, trading director Mike Coupe, and customer services director Gwyn Burr, will remain.

Leighton would not comment and King was unavailable. But it is known the two have been in regular contact since King took the helm at Sainsbury in March.

While Leighton would prefer to make his offer of about 300p a share in the New Year - when Christmas trading should give an indication of the group's prospects - sources say he could mount an offer almost immediately if a competing approach emerges.

Sainsbury, concerned at escalating bid rumours, lined up a team of investment bankers on Friday to shore up its defences. Some worked on Marks & Spencer's successful defence against a bid by entrepreneur Philip Green earlier this year.

Though the Sainsbury family has indicated support for King, it is believed that proposals from serious buyers would be considered.

The family is desperate to restore the value behind the name, which has suffered despite having the hugely popular TV chef Jamie Oliver fronting its advertising.

Rumours of Leighton's interest were fuelled last week when he quit three of his directorships. The resignations came as his Asda colleague Archie Norman announced he was standing down as a Conservative MP at the General Election.

City analysts were excited at the prospect of the pair working on a rescue plan for Sainsbury.

Sources claimed the announcements were a coincidence but that Leighton has subsequently been in touch with Norman to discuss a role for his friend and former colleague should his offer succeed.

The news comes just days after King outlined a radical strategy to overhaul the supermarket chain and reverse a 12-year decline in market share.

A round of talks with leading institutions following the announcement have prompted a positive, if cautious, response.

Bankers believe several private equity groups are circling the UK's third-largest grocer, but Leighton'splans appear most advanced. Ironically, the public face of Sainsbury, Jamie Oliver, has enjoyed more success than the store he advertises.

Recent accounts filed for Sweet as Candy, the company owned by Jamie and wife Jools, made a pretax profit of £2.7m, enough to pay the Olivers a dividend of £450,000 via its parent company. The couple also shared a pension and pay package worth £411,788.