Supermarket shares surged last night after three private equity firms said that they were considering a bid thought to be worth at least £10 billion for J Sainsbury.

The move, which if successful would mark the biggest private equity buyout of a public company in Britain, was perceived by the City as a sign that the property assets of Britain’s supermarket chains could all be unlocked in similar deals.

CVC, KKR and Blackstone were forced to admit to the stock market that they were in the “early stages of assessing a possible bid” for the UK’s third-largest supermarket chain after a report yesterday in The Times.

Shares in J Sainsbury rose 13.8 per cent, or 61¾p, to 507p, valuing the company at £8.7 billion. It is understood that the consortium had retained the investment banks Goldman Sachs and Lazard to advise on a possible bid. CVC began work on an approach several months ago and was then joined by KKR, while it is understood that Blackstone was invited into the group only in recent days.

Sainsbury said in a statement that it had not received any proposal, and many analysts are sceptical that a bid will be forthcoming. They questioned how the private equity firms would negotiate an exit. There are few large European retailers that could afford to bid for Sainsbury’s and regulatory restrictions limit tie-ups with UK rivals. A return to the market might also be difficult, particularly given the lacklustre performance of Debenhams, the CVC-backed retail firm that floated last year.

Sources close to the Sainsbury’s pension fund said that the sheer scale of the supermarket chain’s retirement promises could also hamper a bid. Although Sainsbury’s put an additional £350 million into its final salary pension scheme last year, reducing its deficit to £410 million, the fund’s liability is about £4.3 billion — equal to almost half of a potential bid price.

It emerged yesterday that Baugur, the Icelandic retail investor, had built a 1.26 per cent stake in the supermarket in recent weeks through its Unity investment vehicle. However, Baugur is understood to have sold its stake in the market yesterday, making an estimated profit of £20 million.

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