Oil-rich Gulf Arab state Qatar has made a bid approach for J Sainsbury, which newspapers said valued Britain's third-biggest supermarket group at about 12 billion pounds ($24.5 billion), including debt.
Sainsbury confirmed the approach in a statement on Wednesday, but gave no indication on the price of the proposal.
Newspapers said Qatari investment fund Delta Two, which already owns about 25 percent of Sainsbury, was prepared to offer 610 pence a share for the rest of the company.
Shares in Sainsbury climbed 1.6% in early trading to 594 pence.
"We believe the takeout price could be significantly higher than this (610p)," Numis analysts said in a note. "In our view Sainsbury is an attractive investment opportunity, and we are today raising our target price to 700p."
News of the approach from Delta Two comes three months after the Sainsbury family members blocked a 10.1 billion pound or 582p a share approach from a private equity consortium led by CVC Capital Partners.
The Financial Times on Wednesday quoted people close to the situation as saying the Sainsbury family, which owns around 18% of the business, was unsupportive of the proposal from Delta Two.
However, Seymour Pierce's Richard Ratner said in a note: "The members of the family may well roll over" for what he described as a "huge price" proposed by Delta Two.
"Moreover, even without the family's outright support, the Qataris, not being private equity, might launch an offer," he added.
Qatar's royal family had raised its stake in Sainsbury to 25% from 18% in June to make it the company's biggest shareholder, fuelling speculation of a bid.
Analysts have speculated Sainsbury's 8.6 billion pound freehold property portfolio was the focus for the Qatari group, just as it had been for the CVC consortium.
Property tycoon Robert Tchenguiz, who also holds a stake in Sainsbury, has already pressed management to unlock value from its property.
However, Sainsbury Chief Executive Justin King and Chairman Philip Hampton had reiterated at last week's annual shareholder meeting that keeping the firm's property was key for its future.
Last month a person familiar with the situation told Reuters that Tchenguiz had doubled his stake in Sainsbury to around 10 percent from 5 percent. There had also been speculation earlier this month that Tchenguiz was selling his stake.
Neither Tchenguiz nor the Sainsbury family could immediately be reached for comment. Hussein al-Abdullah, executive board member at the Qatar Investment Authority, and his adviser, John
El-Khair, could also not immediately be reached for comment.