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Sainsbury Starts Property Venture, Profit Surges

British grocer J Sainsbury, the subject of two failed takeover attempts this year, reported a 27 percent jump in first-half profits and said it had formed a joint venture to develop its property potential.

The joint venture with Land Securities follows the collapse last week of a $22 billion buyout bid for Sainsbury, Britain's third-biggest supermarket chain.

Analysts had speculated the grocer could move to release the value of some of its property -- valued at around 8.6 billion pounds ($17.9 billion) earlier this year -- in a move to appease shareholders.

Sainsbury reported underlying pretax profit of 240 million pounds for the 28 weeks to Oct. 6, up from 189 million at the same stage last year.

The retailer had been expected to report profit of around 232.9 million pounds, based on an average forecast within a 225 million to 240 million range, according to Reuters Estimates.

Further Development

"While there are tighter constraints on current consumer spending, we have a strong Christmas offer," Chief Executive Justin King said in the results statement.

"We have had a strong first half and we are confident that the new three-year plans outlined in May 2007 provide Sainsbury's with substantial opportunity for further development of our business."

The retailer's plan to boost sales by 2.5 billion pounds by March 2008 was ahead of target, having grown by 2.3 billion.

"The interim results are, perhaps predictably, ahead of consensus and forecasts will most likely move up by 2-3 percent to reflect this," Cazenove analysts said in a note.

Qatari fund Delta Two ditched plans for a 10.6 billion pounds bid for the retailer last week, blaming worsening credit markets and the cost of winning support from the firm's pension trustees for the failure of the deal.

Restructuring Plans

That followed a decision by private equity firm CVC Capital Partners to abandon a takeover bid in April, following opposition from the Sainsbury family which holds an 18 percent stake. Delta Two still owns 25 percent of Sainsbury.

Delta Two had proposed paying 600 pence a Sainsbury share.

Without the bid speculation, investor attention now returns to Sainsbury's restructuring, which under a new plan unveiled by King in May aims to boost sales by 3.5 billion pounds by 2010 as it expands into non-food including clothing.

The retailer proposed an interim dividend of 3 pence, up 25 percent on the same period last year.

Shares in Sainsbury dipped 0.2 percent to 425 pence at 0817 GMT on Wednesday, valuing the retailer at around 7.6 billion pounds.