Sainsbury takeover talks 'stall' amid credit squeeze

Takeover talks between supermarket Sainsbury’s and its Qatari-backed suitor are said to have stalled as Middle Eastern investment fund Delta Two struggles to secure finance, a report suggested today.

Qatari royal family-backed Delta Two, which is preparing a possible £10.6 billion bid for the retail giant, is thought to have run up against financing troubles amid the global credit squeeze.

It had been expected that Delta Two would announce an offer soon after recent talks with the group’s pension fund trustees over funding of the grocer’s 85,000-member scheme.

The Sainsbury’s family, which hold around 18% of the supermarket, have made it clear that they will only support a deal if a suitable agreement could be reached with the trustees.

Delta Two and the Sainsbury’s pension fund guardians were believed to be close to striking a deal.

But the Qatari fund has had to go back over its finances amid the tightening in credit markets leading to fresh fears over its ability to fund any possible bid, according to the Mail on Sunday.

Delta Two was already forced to revise its proposals in order to gain access to Sainsbury’s books, easing the level of debt involved in the approach.

The change in terms, unveiled in September, saw the possible takeover funded with £4.85 billion of shares and payment-in-kind notes guaranteed by the State of Qatar – an increase of £850 million.

However, it is believed there is still doubt over the level of debt involved - nearly £6 billion – amid the credit market meltdown and growing concern also over the financial might of the Qatari government.

Reports suggest that the country’s liquefied natural gas reserves, from which it derives much of its wealth, may run out sooner than expected.

The Sainsbury’s pension trustees are also thought to be driving a hard deal, reportedly demanding around £1.75 billion for the scheme.

Delta Two is run by the Qatar Investment Authority, whose chief executive is Sheikh Hamad bin Jassim bin Jaber al Thani, Prime Minister of Qatar and a member of the Qatari royal family.

The fund was not immediately available for comment.