Sainsbury's shares up amid takeover rumours

Shares in Sainsbury’s surged more than 5% today as speculation circulated in London that it may soon face a takeover bid.

Analysts named US-based retailing giant Target among potential buyers for the UK’s third-largest retailer, which saw its share price rise 13.5p to 271.5p.

Retail tycoon Philip Green, who made a £6.4bn (€9.4bn) takeover approach to Sainsbury’s last summer, distanced himself from speculation that he may revive his interest.

The BHS and Arcadia owner said: “We have not made any approach for Sainsbury’s.”

The company itself declined to comment.

Media reports earlier this year said Target executives had visited the UK to talk to a number of companies about potential tie-ups.

Sainsbury’s has been considered vulnerable to a takeover bid after it lost ground over the past 12 months to rivals Asda and Tesco due to stiff price competition.

A shake-up of management followed with Justin King parachuted into the company as chief executive in March after a successful stint in the food department of Marks & Spencer.

Controversy then surrounded the departure of chairman Sir Peter Davis in July as shareholders slammed a £2.3m (€3.4m) share award for a year in which profits fell 2.9% to £675m (€992m).

Clive Black, of stockbrokers Shore Capital, said Sainsbury's had “retail assets to die for” that might attract a potential bidder.

The sector is heavily regulated and potential savings would be minimal compared with the deal that saw Morrisons take over Safeway in February, he said.

Henk Potts, of Barclays Stockbrokers, said: “Sainsbury’s could well be vulnerable. They are a distressed company and when you see that then the vultures begin circling around.”

Sainsbury’s had been left behind as rivals such as Tesco and Asda moved into non-food areas such as electronics, music and clothing, where the margins are much higher, he said.

Hopes of a turnaround were boosted today by news that former Safeway operations director Lawrence Christensen had been recruited to sort out problems in the supply chain.

His appointment follows that of Gwynn Burr, a former Asda executive, as customer services director.

One analyst, who declined to be named, said: “Mr Christensen is a very good hire, considering Sainsbury’s really needs to get to grips with its logistics system.”