J Sainsbury is set to meet its suitor Delta Two today, amid signs of increasing tensions between the Qatari-backed fund and Britain’s third-biggest supermarket chain over a potential £10.4 billion takeover.

The two sides have been locked in negotiations since last month, when Delta Two, which is backed by the Qatari Government, first approached the supermarket group with its indicative 600p approach.

While the board is believed to be in favour of a deal in principle, the Sainsbury family, which controls 18 per cent of the group, has said that it would not back a takeover bid that leaves the chain highly leveraged or that does not satisfy the pension trustees’ demands. The family also covets a price higher than 600p.

Delta Two’s bid is predicated on receiving the backing of shareholders holding 75 per cent of Sainsbury’s stock, and so the retailer’s board is thought to be unwilling to recommend a bid that could be undeliverable, given the family’s opposition.

The supermarket is thought to want Delta Two to put as much as £1 billion more cash into its financing arrangements, so lowering the amount of debt that Sainsbury’s will be left with.

When it announced the takeover approach, Delta Two said that it would fund the deal by paying £3.6 billion of its own cash, a £1 billion payment-in-kind loan and £7.8 billion of debt, including the supermarket group’s existing £1.8 billion borrowings.

The family is concerned that the level of interest payments required would leave the supermarket hobbled, without sufficient cash left over to fund future growth and investment.

Concerns have been heightened by the current credit crunch, which has prevented dozens of highly leveraged private equity deals from going ahead.

At the meeting scheduled for 2.30pm today, Delta Two, which is led by Paul Taylor, is expected to express reluctance to change the structure of its offer significantly or raise the price.

The Sainsbury’s board is in a quandary because the company’s shares are almost certain to fall back if the deal does not go through. It is also thought to be under increasing pressure to open the books to Delta Two from Robert Tchenguiz, the entrepreneur who owns 10 per cent of Sainsbury’s stock and is seen as increasingly keen to back the Qatari bid.

The tycoon had been keen to persuade the Sainsbury’s board to split the business into separate operating and property companies, but that plan, which had already been rejected by the retailer’s management, was firmly buried after his property joint venture with Mitchells & Butlers, the pub company, was put on ice last week.

Mr Tchenguiz expressed frustration with the Sainsbury’s board when it refused to let shareholders consider a private equity firm’s earlier bid for the supermarket that was priced at 582p. Given the downward trend in the stock market since, Mr Tchenguiz is likely to be even more keen for a deal with Delta Two to proceed.

The Sainsbury’s board is facing pressure from all sides because the Qatari fund is becomingly increasingly frustrated with the board’s demands, noting that many details of the two sides’ meetings have appeared in press reports as a way of putting pressure on the Qatari fund to meet its demands.

“They really don’t appreciate that,” one source said yesterday.

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