Speculation of a takeover bid for J Sainsbury sent shares in Britain's third-biggest supermarket chain up nearly 8 per cent yesterday as the FTSE 100 enjoyed its highest close for two months.

Rumours of an approach for Sainsbury's, priced at about 500p a share, spread across the stock market and saw shares in the business soar 25p to 344p, valuing it at £6 billion.

One trader said there was speculation that the Qatari Investment Authority (QIA) was working on a bid with Robert Tchenguiz, the property tycoon, and an unnamed investor.

The QIA scrapped a planned £10 billion bid for Sainsbury's in November last year because of the credit crunch.

Qataris in frame for 14% Sainsbury’s grab

Shares in the superstore operator rose after an investor spent £1.3bn acquiring at least 250 million shares in Sainsbury’s

Times Archive, 1985: The fine art of selling groceries

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It retained its 25.3 per cent shareholding and recently took its stake to more than 27 per cent in two separate share purchases. Mr Tchenguiz, who backed the original offer, still holds a 10 per cent stake.

The QIA was unavailable for comment but sources in the City said they doubted an approach was imminent given the lack of ready private equity funding for any deal. Mr Tchenguiz is also not understood to be involved in any talks.

A Sainsbury's spokeswoman said: “We can't comment on market rumour and speculation.”

One trader said: “What's happened to the shares just reflects what's going on in the market in general. Any slight rumour is enough to send a retailer's share price through the roof at the moment.”

Industry experts believe that merger and consolidation activity in the sector is inevitable as retailers battle with the toughest conditions for a quarter of a century.

So far the only firm approaches have been at Instore, the discount homewares-to-clothing chain, and Woolworths.

Malcolm Walker, the founder of the Iceland frozen food chain, is expected to renew his bid for Woolworths's 815high street stores in the coming weeks after having his initial approach rejected as “unacceptable”.

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