Friday, Jul 04, 2008

 
  
   By Lilly Vitorovich  
   Of DOW JONES NEWSWIRES  
 

LONDON (Dow Jones)--The government of Qatar has increased its stake in J Sainsbury PLC (SBRY.LN) to 26%, a move which may fuel talk of another takeover tilt for the U.K.'s third biggest supermarket chain.

Qatar Investment AuthorityQatar Investment Authority acquired five million shares on July 2, taking its stake to 26%, or 454.5 million shares, from 25%, according to a shareholder holding notice released by Sainsbury Friday.

Qatar Investment and Sainsbury weren't immediately available to comment on the shareholding increase.

Sainsbury's share and market value has fallen sharply since Qatar abandoned its GBP10.45 billion takeover proposal for the group in November due to credit-market volatility. The credit crunch and subsequent squeeze on consumer spending has also hit Sainsbury shares.

Prior to the credit woes, Sainsbury management were under pressure to exploit the retailer's extensive property portfolio, which is valued at around GBP8.6 billion.

At 0946 GMT, Sainsbury shares were up 7 pence, or 2.6%, at 287 pence, valuing the group at GBP5.00 billion. The stock has fallen 33% since January, and 51% over the past 12 months.

The FTSE 100 index was down 0.7% Friday. It's fallen 16% since the start of 2008, and 19% over the past 12 months.

Last month, Sainsbury, the U.K.'s third biggest supermarket group by sales behind Tesco PLC (TSCO.LN) and Asda Group Ltd., reported a slowdown in first-quarter underlying sales growth, with most of the rise accounted for by rising prices.

Stripping out sales from new store openings and fuel, like-for-like sales were up 3.4% in the 12 weeks to June 14 from a year earlier, compared with a 4.1% rise in the previous quarter.

The price of fuel has risen about 20% in the past year, though its impact on profit is marginal.

Total sales rose 8.1% over the same 12 week period.

At the time, Sainsbury Chief Executive Justin King said the "challenging economic environment continued throughout the quarter," but added, "whilst we anticipate that the environment will remain challenging, we operate from a strong financial position and our expectations for the full year remain unchanged."

Company Web site: www.sainsbury.co.uk

-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com

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(END) Dow Jones Newswires

July 04, 2008 06:13 ET (10:13 GMT)