By Jorn Madslien
Business reporter, BBC News
Three-and-a-half years after taking over at the helm of Britain's third-largest supermarket chain, chief executive Justin King is preparing for the next move.
J Sainsbury is currently in talks with an investment fund backed by the Qatari government investment fund, Delta Two.
The fund wants to acquire the grocer in a £12bn deal that industry analysts say is as good as done.
By law, at this stage in the process there is only so much Mr King can say about it, so for the moment the 46-year-old executive is choosing his words carefully.
But it seems he has a pretty good idea what to expect.
A takeover by Delta Two would differ markedly from one mooted by private equity investors CVC early this year, Mr King explains in an interview with the BBC News website.
But he is eager to point out that, "as we sit here today, it's a non-bid, we haven't received a bid and we may never receive a bid".
The CVC approach, which in the end did not lead to a formal offer, would have been funded to a large extent by debt that would have been serviced, at least in part, by flogging Sainsbury's portfolio of retail property, much of which is in prime locations in city centres.
A Delta Two offer, if it was to materialise, would be markedly different.
"It isn't a conventional leveraged private equity type arrangement, because sitting behind it is a sovereign investment fund," says Mr King.
Investors are impressed with Sainsbury's recovery
"The absolute level of equity that they have suggested might be involved - I have to use those words because at the moment they're only suggesting it might be involved - is much greater; around £5bn worth of equity out of a £12bn purchase price," Mr King explains.
Moreover, after three months of negotiations, Delta Two has offered assurances that it would not want to asset-strip the supermarket chain.
"They've said it's their intention to keep the property and the operating company within the same entity," Mr King says, adding that, "the fact that they intend to keep them together is a very positive sign of their long-term intent".
That is not to say the properties will remain untouched. In fact, last year Sainsbury's financial jugglers put down half the property portfolio as collateral to refinance £2bn of debts, slashing its interest costs by £13m a year in the process.
"Many of the things people speculate a new owner might do, if you look at what the management has been doing for the last two years, that's exactly what we've been doing," says Mr King.
Indeed, it is no secret that Sainsbury's is in pretty good shape, thanks to the successful execution of a restructuring plan hammered out by Mr King and presented to investors almost three years ago.
At the time, the chain was in deep trouble. Its distribution system was crumbling. Too frequently, customers were faced with empty shelves, and during 2004 the group issued three consecutive profit warnings while its share price slipped to historic lows.
The turnaround since has been hugely successful, insists Mr King.
"We told the outside world we'd grow sales to £2.5bn and we would double profits over the three years, and we're on track to do both of those things.
"We've done what we said we would do. We've delivered value for shareholders.
"The share price has moved up from around £2.60 when I joined [in March 2004] to £5.80 or so now," Mr King points out."
The current share price is only marginally lower than the offer Delta Two is expected to make, said to be at least 600p per share.
Industry analysts confirm Mr King's story.
"He's done an amazing job at Sainsbury's," says one from a major US investment bank.
Another who works for a rival European investment bank agrees: "He's done the hard yards of the recovery already, and successfully transformed the business."
Mr King has also laid the foundations for strong growth in the years ahead, analysts say, pointing to how the grocer's management team has been bolstered by a string of high-profile hirings in recent months, despite the uncertainty about Sainsbury's future.
Many of Sainsbury's staff have shares in the company
"They've managed to secure good people throughout this period, which says a lot," says the analyst with the US investment bank. "It's testimony to Mr King's skills as a manager."
So if Delta Two was to make an offer for Sainsbury's, "they'd be buying the company on the basis of the current management team staying in place," predicts the analyst.
Board chairman Sir Philip Hampton would probably be replaced by former Asda deputy chief Tony Campbell.
But before any of that can happen, the thorny issue relating to the funding of Sainsbury's pension fund would need to be resolved.
The Sainsbury family, which holds 18% of Sainsbury's shares, is expected to reject any bid that does not make proper provision for the pension fund.
Delta Two has reportedly been loath to pump in more than £1bn, while the family has demanded double that sum.
"The family's motivation is slightly less hardnosed than most shareholders'," explains the analyst with the European investment bank. "They feel they have a duty to Sainsbury's staff.
"It would be more of an issue with a normal financial buyer," he adds. "I would be surprised if this became a deal-breaker."
Three years ago, Mr King rose from relative obscurity to take charge of the Sainsbury's rescue operation.
In the process, he has made a lot of shareholders, including 40,000 of the supermarket's staff, a lot wealthier.
Their wealth is set to be realised if a deal is done with Delta Two.
At the same time, Mr King's personal wealth is set to swell, by £11m in one swoop on the back of a share options-linked remuneration package agreed back in 2004.
In addition, his new employer would need to offer him an attractive package to stay.
Mr King's market value has risen sharply in recent years, so a £40m five-year deal pegged to continued performance has been mentioned.
"He's pretty young, and he's done an amazing job at Sainsbury's, so he'll be in demand," the analyst with the US investment bank says.
Mr King himself insists that nothing has been agreed.
"I've had no conversations - no conversations - about what my future might be," he says.
And if, in the end, no deal is struck?
Well, Mr King will be fine, the analyst with the European bank points out.
"He's not going to be on bread and water. He's relatively well paid as it is."