Sainsbury is facing intense competition from the likes of Tesco and Asda, and is under pressure from the City to improve its UK performance before splashing out on a US acquisition.
Yesterday Sainsbury bought 2 million non-voting shares in Food Giant for $62m from the estate of the American group's late chairman and chief executive, Israel Cohen.
The purchase of the shares for $31 each raises Sainsbury's non-voting stake in the US supermarket chain to 19.9 per cent from 16.7 per cent.
Sainsbury bought the original holding two years ago for pounds 205.6m. Britain's second-largest supermarket chain also owns 50 per cent of Food Giant's voting shares.
The deal opens the door for Sainsbury to make an offer for the rest of the voting shares within the next four years. It stipulates that Sainsbury must make a separate payment to the estate for anything above $31 that it might offer non-voting shareholders.
A spokeswoman for Sainsbury declined to comment on whether the company is considering making a bid for Food Giant. Sainsbury shares finished up 0.5 p at 391.5p in London while Food Giant's shares eased to $33.75 in New York.
David Sainsbury, chairman of Sainsbury, said the company was "very happy with our investment in Giant and our developing relations with the company. We were glad of the opportunity to help the executors of Israel Cohen's estate with their tax planning."
Mr Cohen died on 22 November at the age of 83. He had been with Giant since it opened its first store in 1936. At the time of his death he owned 2.8 million class-A, non-voting shares and 125,000 voting shares.
In his will he left voting rights to a team comprising his sister and four senior Food Giant executives. Mr Cohen stipulated that the estate could not sell the voting stock unless an equal offer was made for the non-voting stock.
However, City analysts concluded that Mr Cohen's death opened the way for Sainsbury to make an important US acquisition.
Like Shaw's, the US supermarket chain that Sainsbury bought in 1987, Giant, based in Washington DC, operates mainly in the north-east.
It owns 164 supermarkets in Maryland, Virginia, Delaware, New Jersey, and Washington, DC.Reuse content