The New Nation - Internet Edition

Reuters, London

A Qatari fund has dropped plans for a 10.6 billion pound ($22.1 billion) bid for Britain's J Sainsbury, blaming worsening credit markets and the cost of winning support from the firm's pension trustees.

The fund, Delta Two, owns a 25 percent stake in Britain's third-biggest supermarket group and said today it remained supportive of Sainsbury's operational strategy.

Delta Two's withdrawal marks the second failed bid for Sainsbury in less than seven months. Private equity firm CVC Capital Partners abandoned a takeover attempt in April, following opposition from the company's board and the Sainsbury family, which owns about 18 percent of the supermarket group. The Sainsbury board opened its books to Delta Two after it proposed a 600 pence-a-share cash offer, which was above CVC's proposal of 582 pence. However, the Sainsbury family remained lukewarm about selling out at that price.

"Since Delta Two's original proposal was submitted to the board of Sainsbury, the required funding and cost of capital has increased significantly, which has adversely affected the investment case," the Qatari fund said in a statement.

"This reflected a combination of factors including the deterioration of credit marketstand the arrangements for the future funding of the Sainsbury pension schemes necessary to gain the backing of the Sainsbury pension trustees."

Sainsbury said in a separate statement it had a strong future as an independent company and repeated that first-half results, due on Nov. 14, would show sales in line with analysts' expectations for the full year.