Qatari investment vehicle Delta Two has abandoned its bid to acquire Sainsbury’s, leading to a sharp fall in the grocer’s share price in early trading this morning.

Delta Two walked away because the turmoil in the global credit markets had affected the investment rationale for the deal. It was also concerned about future funding of the Sainsbury’s pension scheme.

In a statement, Delta Two said: “Since Delta Two’s original proposal was submitted to the Board of Sainsbury, the required funding and cost of capital has increased significantly, which has adversely affected the investment case.”

The Takeover Panel had given Delta Two until Thursday 5 pm to decide whether or not to make a bid.

Sainsbury’s tried to put a brave face on the collapse of the deal, but its share price fell by nearly£1 to£4.58 this morning from a close of£5.55 on Friday. Shares reached a high of£5.84 last month, driven by bid speculation.

Sainsbury’s chairman Sir Philip Hampton said: “Sainsbury’s has attractive future prospects and the recovery strategy commenced in 2004 is well advanced and continuing to deliver growth in the business.

The grocer was informed late on Sunday by Delta Two that it would not proceed with a bid.

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