Sainsbury's surges amid takeover speculation

According to The Sunday Times, Apollo is circling Sainsbury’s with a view to possibly launching bids of more than £7bn, after scouring the industry for takeover targets.

The Times said Apollo’s interest in Sainsbury’s was understood to be "exploratory". That its interest is being made public at this stage may also act as a deterrent to any deal, it said.

Apollo, which was outbid for Asda last year, is still in talks to join the Fortress-led consortium bidding for rival supermarket chain Morrisons. The Times said any involvement in that deal may preclude a move for Sainsbury’s.

At 1020 BST, the shares were up 11.9% at 329.77p.

Broker Shore Capital referred to the weekend press report as "flaky".

Analysts Clive Black and Darren Shirley said: "We see such a story as not only sensationalist but quite shallow, the paper qualifying its big headline by saying that Apollo’s interest is ‘understood to be exploratory’, so effectively rehashing what has been a widely considered potential story that has been around since Apollo lost out to TDR Europe and the Issa Bros., for Asda.

"Indeed, Apollo has also shown interest in acquiring Morrisons, deciding in the end though to seek to work in conjunction with the Fortress consortium that is currently part of the Yorkshire supermarket’s bid situation. We would suggest that the outcome of the Fortress offer is, therefore, likely to be key to the private equity group’s decision-making."

They added: "All that said, if Apollo does not participate in Morrisons’ future then we cannot discount that the PE group nor other mega-finance houses will consider looking at Sainsbury, whilst the Czech Sphinx, Daniel Kretinsky, retains a circa 10% share of JS. Accordingly, expect real and made up noise to continue."