Sainsbury's board to recommend £10.6bn takeover offer from Qatar

The board of supermarket giant J Sainsbury is set to recommend a revised takeover offer from Delta Two, the Qatari-backed investment fund.

An announcement to the stock market is expected to be made towards the end of this week.

It is believed that Delta Two has also won the backing of the Sainsbury's pension fund trustees, who had been concerned that the deficit in the fund would not be plugged in the event of a leveraged takeover of the retailer. The scheme has 85,000 members and £4.25bn of funds under management. At the end of the last financial year, it reported a deficit of £100m.

The Delta Two takeover offer values Sainsbury's at 600p per share, or £10.6bn. The board of Sainsbury's, led by chief executive Justin King and chairman Sir Philip Hampton, opened the company's books to Delta Two about three weeks ago so the Qatari fund could carry out due diligence. The move by the board was made after Delta Two said it would raise the amount of equity in the takeover bid by £850m.

It is thought that the Sainsbury family, who collectively own 18 per cent of the group's shares, will now fall in line and sell their stake to Delta Two.

Individually, Lord David Sainsbury of Turville, the Labour peer and former minister of science, owns 7.75 per cent of the company, while Lord John Sainsbury of Preston Candover holds around 3 per cent. Lord David Sainsbury, the leader of the family group, had previously said he would not support a highly levered, "private equity style" bid for Sainsbury's that would leave the company without the financial flexibility to compete with the likes of Tesco and Wm Morrison. It had previously rejected a highly geared bid from private equity giant CVC.

If the Sainsbury's deal is completed as expected, it will be just the latest instalment of Middle-Eastern money to find a home in the UK. The record price of oil has left states such as Dubai and Saudi Arabia with massive cash reserves. Increasingly, this capital is being put to work in Western countries, as Middle-Eastern rulers look to diversify their assets away from oil and gas.

Borse Dubai, the stock market company, now has a 20 per cent stake in the London Stock Exchange and a 19.99 per cent holding in the New York- based Nasdaq.

Meanwhile Emirates and Etihad Airways have spent millions of pounds on sponsorship deals with Arsenal and Chelsea football clubs.

Sainsbury's shares closed marginally up on Friday at 583p, just 17p off the expected offer price.