Sainsbury's bidders set clock ticking

The private equity consortium circling supermarket giant J Sainsbury will decide within eight days whether to abandon its possible £11bn bid or to launch a formal offer.

The decision by CVC, Kohlberg Kravis Roberts, Blackstone and Texas Pacific Group represents a dramatic about-face for the consortium and will reignite a process that has stalled in the month since bid plans were first revealed.

According to sources close to the deal, the desire to bring matters to a head is a direct result of the wave of negative publicity that the bid has generated. The revelation also comes amid increasing speculation that Sainsbury's, led by Justin King, will request the Takeover Panel imposes a "put-up or shut-up" deadline to end the uncertainty surrounding the company.

The buyout firms had until recently been content to settle into a waiting game in the hope that the target's share price would ease. Sainsbury's shares rocketed on news of a possible bid last month, and the stock remains 21 per cent above where it was immediately before the buyout firms were forced to reveal their plans. "That policy has been abandoned. There will be a decision within a week," said one source.

The new-found urgency is due to the firestorm of controversy over the possible takeover of one of the UK's most recognisable brand names. Unions led by the GMB have mounted a fierce campaign, branding private equity firms "asset-strippers" and "casino capitalists". Several Labour MPs, dependent on union support for votes, also launched attacks on private equity and called for an overhaul of regulations to the industry.

In response, the British Venture Capital Association last week launched a committee, led by City veteran Sir David Walker, to improve the industry's transparency and accountability. Both Tony Blair and Gordon Brown also came out last week in defence of the industry.

Should the CVC-led consortium go ahead and bid, well-placed sources believe the move could spark a flurry of interest.

One insider said that various other private equity and property players were continuing to monitor the situation. "There are a lot of people waiting for [others] to... put a marker down. It's not about whether the money is available. People think it can be done but the share price is very frothy."

Marks & Spencer has now ruled itself out of the bidding for six months, despite earlier hints from chief executive Stuart Rose.

There also continues to be speculation over the involvement of Allan Leighton, the current Royal Mail chairman, who made his reputation turning Asda around in the 1990s before selling it to US giant Wal-Mart. But it is understood he has not yet committed to any party, and will not do so until a firm offer is made.