Sainsbury's bid faces opposition of unions, family and pension trustees

Leading trades unions have called on ministers to block a potential takeover of Sainsbury by a Qatari investment fund, saying it was not in Britain's interests to allow the retailer to become "nationalised property of a Gulf state".

Delta Two, which is controlled by Qatar's Prime Minister, Sheikh Hamad bin Jassim al-Thani, and advised by the former NatWest banker Paul Taylor, has proposed a 600p-a-share takeover which values the supermarket at £10.44bn.

The Sainsbury family, including the former science minister Lord Sainsbury of Turville, who met the sheikh last week, are understood to be strongly opposed to the move, while MPs and the GMB union have already voiced fears about the future of the company and its employees.

Yesterday, the Sainsbury board held a meeting with Delta Two to discuss its proposal, which is to be funded with £4.6bn in equity and subordinated payment in kind (PIK) shares and debt of £6bn. A spokesman for the Qatari fund said: "Discussions were friendly, talks are ongoing." The fund has made it clear it wishes to win the agreement of the board and the family.

Brian Revell, national organiser for food and agriculture of the T&G section of the Unite union, described Sainsbury "as a national icon with a history going back over 150 years".

"How on earth can it be in Britain's interest to allow Sainsbury's to become the nationalised property of a Gulf state?" he said, pointing out that about 18 per cent of the nation's food supply passes through its stores to the consuming public. The company provides stable employment for more than 150,000 people, he added.

"We do not consider it to be in the national interest for Sainsbury's to be acquired by Delta Two, the investment arm of the Qatari state," Mr Revell said. "It is also probable that the new owners will seek to split the property from the retail business. This will lead to higher prices and a less-competitive Sainsbury's. The balance between the major supermarkets established by the Competition Commission when Morrison's acquired Safeway will be overturned."

The T&G section of Unite has more than 20,000 members in the stores and in distribution of Sainsbury's goods, he said.

A spokeswoman for the Department of Business, Enterprise and Regulatory Reform said it was a matter for the company and the shareholders and declined to comment further.

A bid could also be resisted by trustees of the Sainsbury pension fund. Any highly leveraged bid would have difficulty in completing were it not to guarantee the future of the scheme, which has a deficit of £450m. Delta Two has yet to approach the trustees about its arrangements.

Sam Hart, an analyst at Charles Stanley, said it was likely that Delta Two would look to structure the takeover as a Scheme of Arrangement, in order to minimise tax liabilities. In that case at least 75 per cent of shareholders would be required to approve the deal. The support of the Sainsbury family would be crucial, as they own 18 per cent and are thought to have influence over 35 per cent.

If the support of the Sainsbury family cannot be gained, Delta could structure the deal as a tender offer. The required 50 per cent shareholder approval could be more easily achieved.

Support from the entrepreneur Robert Tchenguiz, who holds some 10 per cent of the stock, would be likely, and a significant proportion of institutional shareholders would probably be willing sellers at 600p, Mr Hart added.

"Ultimately, however, it is the pension fund trustees that could determine the outcome," he said. "The trustees would undoubtedly demand significant up-front payments because of the considerable risks of being linked to such a highly leveraged entity."

Playground of the rich: where the Qataris pitched their bid

It is a world of champagne cocktails, supermodels and the super-rich. And last week, Costa Smeralda, on the glamorous north-east coast of Sardinia, was the backdrop for the meeting between members of the Sainsbury family and Sheikh Hamad bin Jassim bin Jaber al-Thani, Qatar's Prime Minister and controller of the Delta Two investment fund, which has a keen eye on the retailer.

Ever since the 1960s when the Aga Khan developed the Costa Smeralda, which takes its name from the sparkling green waters of the Mediterranean sea, the Italian island has been considered a playground for millionaires. Diana Ross, Robbie Williams and Lionel Richie have all been jetted in to perform at parties for the mega-rich, and the island is also a favourite spot for political leaders. The former prime minister Tony Blair and his family were invited to holiday in Sardinia at the 27-bedroom villa of the former Italian premier Silvio Berlusconi.

Lord Sainsbury of Turville, the former science minister, and Lord Sainsbury of Preston Candover were flown into Sardinia on the Sheikh's private jet after requesting an audience with Delta Two. They wished to discuss the fund's plans for Sainsbury after Delta built up a 25 per cent stake in the company, topping the 18 per cent that family members hold between them.

Over a sandwich lunch, the pair chatted with the Sheikh and Paul Taylor, the former NatWest banker who advises the fund, about their proposals for a 600p-a-share takeover of the company. Though the conversation was friendly, the family were resistant to any moves on the 150-year-old company.

The get-together took place on 10 July at the five-star Cala di Volpe Hotel, a favourite gathering point for the jetset, and a regular haunt of the Sheikh. He had chartered a yacht, called the Constellation, but it was little-used during the trip.

Underlining the Costa Smeralda's attractions to business rainmakers, also moored off the coast were the yachts of Philip Green, the billionaire boss of Top Shop, and Aidan Barclay, the chairman of the Barclays' holding group and son of Sir David.

The Cala di Volpe hotel is one of the more opulent hotels and is located just a 10-minute limo ride from the centre of Porto Cervo, which is famed for its world-class marina and glamorous night life. Flavio Briatore, the Renault Formula 1 boss and Naomi Campbell's ex, owns the infamous Billionaire nightclub there while Roman Abramovich and Princess Caroline of Monaco moor their yachts in the marina.

The hotel boasts a private beach where Diana, Princess of Wales, and Dodi al-Fayed spent their last summer together in 1997 and also a bar which was used by Roger Moore as a bedroom in the Spy Who Loved Me.

Every summer, the private villas, luxury hotels and yachts are packed with celebrities, attracted by beautiful coast and notorious nightlife. Tom Cruise, Elizabeth Hurley and Rod Stewart are among the A-listers to have holidayed here and it was also the place where Dennis Kozlowski, the former chief executive of Tyco International, who was convicted of looting the company of more than $150m, held a $2m lavish bash for his wife.

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