Shares in Sainsbury's sparked into life today after a report said a heavyweight US buyout firm was stalking the troubled retailer.

Kohlberg Kravis Roberts, the New York-based company that expressed an interest in Safeway last year, is said to be circling the UK's third largest chain.

The report in yesterday's Observer brought Sainsbury's shares into focus today, lifting the group to the top of the FTSE 100 Index risers board.

With Sainsbury's valued on the London market at £5.15 billion, any bid for the retailer would need to be pitched at around £6 billion.

KKR, which has completed 110 transactions involving in excess of 114 billion US dollars of total financing since 1976, declined to comment today.

The Observer said it was likely that Archie Norman, the former Asda boss and a consultant to KKR, would lead any new management team at Sainsbury's.

The new owners would sell and lease back the lucrative property portfolio in order to repay debt and take out cash in dividends, the report said.

However, it is thought that KKR may wait a year until bidding as it assesses the performance of new Sainsbury's chief executive Justin King.

He took over from Sir Peter Davis last week, a switch which came after Sainsbury's said like-for-like sales in the financial year to March 27 fell by 0.2% and by 0.9% in the fourth quarter.

Sainsbury's blamed the impact of its continuing business restructuring for the fall, although it added that price competition in the wake of Morrisons' acquisition of Safeway had made the trading environment much harder.

Mr King joined the company from Marks & Spencer, where he was head of the retail group's food department.

Monday April 05, 2004