Qatar is selling a £1.3 billion stake in British bank Barclays, stoking talk it will use a big profit to make a move on UK food retailer J. Sainsbury.
Qatar owns 26 per cent of Sainsbury and the retailer's shares jumped by a fifth last Thursday on talk the sovereign wealth fund was planning a renewed offer for it, after a previous bid attempt failed in 2007.
Qatar Holding is set to make a £600 million profit by selling Barclays shares after exercising warrants, and will remain its biggest shareholder. It will be the second big Middle Eastern investor to make a big profit from a stake in the bank this year, after Abu Dhabi made $2.5 billion on the sale of an 11 per cent stake in June.
By 0950 GMT Barclays shares were down 4.5 per cent at 364.85 pence. Sainsbury shares were up 4.3 per cent at 344.4 pence, valuing Britain's third biggest supermarket group at £6.3 billion.
The Qatar Investment Authority was mulling an offer at 420 pence per Sainsbury share, traders said last week, well below its 2007 proposal of 600 pence a share.
"I think around £5 would be a more realistic price than the one people were talking about last week," said S&P Equity Research analyst James Munro.
Other analysts agreed a bid would need to be pitched at 500 pence or above, citing attractive property assets, ambitious growth plans and the 15 per cent stake still held by the Sainsbury family.
QIA bought most of its Sainsbury stake at 575 pence a share, and then some more at 595 pence.
Sainsbury and QIA declined to comment.
Qatar will still hold a stake of about seven per cent in Barclays and said its move was part of its portfolio management programme and it intended to remain a long-term shareholder in the bank.
It is selling 379.2 million shares, which will come from the exercise of warrants for the same amount of shares at a price of 197.775 pence.
Barclays will receive £750 million from the warrants, which will boost its Core Tier 1 capital ratio by about 15 to 18 basis points to near nine per cent, from 8.8 per cent at the end of June, including the sale of Barclays Global Investors.
Qatar Holding owns another £750 million of warrants and Abu Dhabi's sovereign wealth fund owns £1.5 billion of warrants, all exercisable at 197.775 pence apiece.
The warrants were part of a controversial £5.8 billion fundraising by the bank last November, when it avoided selling the state a stake by raising money privately.
Roger Jenkins, a top Barclays banker who orchestrated that fundraising, left the bank in August and his new investment firm is working with Qatar, according to an industry source. A spokesman for the firm, which specialises in the Middle East, declined to comment.
The Barclays shares are being sold by Credit Suisse via an accelerated bookbuild.
QIA was founded by the State of Qatar in 2005 to strengthen its economy by diversifying into new asset classes. Subsidiary Qatar Holding is its main vehicle for strategic and direct investments by the state.