Delta Two today cleared a significant hurdle in its £10.6 billion bid to acquire J Sainsbury when it secured an agreement with the supermarket group's pension trustees to enter confidential discussions.

Today's announcement by the Qatari-backed fund, which has proposed paying 600p-a-share for Sainsbury's, follows last week's disclosure that the company's board will open its books to allow the bidder a period of due diligence.

Shares in Sainsbury's were unchanged 574p in early trading this morning.

Reaching an agreement with Sainsbury's pension trustees is integral to the success of a deal and it is estimated that Delta Two may have to offer as much as £2 billion upfront to guarantee future pension payments for Sainsbury's staff.

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Delta Two said today: "Such exchange is necessary so that Delta Two can formulate an appropriate pension proposal for the trustees' consideration and, in turn, so that the trustees have the factual context in which properly to assess any pension proposal made by Delta Two."

As yet, Delta Two has not made a proposal to the pension trustees. In early 2006, Sainsbury's poured £350 million into its £580 million pension deficit after raising £2 billion by securitising some of its properties.

Most recently, the scheme's trustees have been working on a triennial review of the fund to provide an up-to-date valuation of the scheme.

Delta Two said: "Following the exchange of confidential information, the two parties will be able to engage in detailed discussions regarding the impact of the proposed transaction on the Sainsbury's pension schemes and the appropriate terms of any agreement.

Paul Taylor, strategic investment adviser to Delta Two said: "We are pleased that detailed discussions can now commence, following the signing of a confidentiality undertaking.

"We have a high regard for the management and employees of Sainsbury's, and we and the trustees are keen to reach appropriate agreement in a timely manner, which is in the best interests of the company and the scheme members."

Delta Two's engagement with Sainsbury's pension trustees was bolstered after the Qatari-backed group agreed to inject more equity into its debt-heavy offer.

Putting more debt, or "leveraging up", a business, can increase the risk that the company may not be able to honour its payments to pension holders if it encounters future difficulties. It also changes the covenants agreed between the trustees and the business that are aimed at protecting pensions.

Most recently, Alliance Boots’ new owners KKR and its partner Stefano Pessina, were forced to agree a £1 billion package to cover the company's pension schemes, comprising a £600 million security package and a £418 million injection spread over ten years. In the past, pension schemes commitments have stood in the way of bidders taking over companies.

In 2004, BHS and Top Shop owner, Sir Philip Green, famously walked away from offering £9.1 billion for Marks & Spencer after the now revitalised retailer's pension scheme trustees offered scant co-operation in sharing information about its retirement commitments.

Permira, the private equity firm, also decided against moving ahead with an offer for WH Smith after discovering it would have to put up £100 million to cover a black hole in its pension scheme.

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