Oct. 26 (Bloomberg) -- J Sainsbury Plc, the U.K. supermarket chain in takeover talks with a Qatar-backed fund, cast doubt on the deal by saying the bidder is seeking more cash from the Persian Gulf emirate.

The stock closed at its lowest level for more than a month after Sainsbury said there's ``no certainty'' the additional 500 million pounds ($1.03 billion) of equity funding will be forthcoming. Delta (Two) Ltd. has until Nov. 8 to make a ``firm'' bid for the third-largest British grocery retailer, according to a separate ruling from the U.K.'s Takeover Panel.

The fund's approach values Sainsbury at almost 11 billion pounds. Delta owns 25 percent of the chain and has been trying to buy the rest for more than three months, attracted by Sainsbury's 788 outlets and 8 billion pounds of real estate. It must win over pension trustees and the Sainsbury family, which has opposed loading the London-based company with debt.

``The market feels that Delta Two are having problems with funding,'' said Christopher Gower, an analyst at MF Global in London with a ``sell'' rating on the stock. ``There have been rumors that the Qataris don't have as much cash rolling around as people had presumed.'' Gower added that he has ``few doubts'' Delta will ultimately secure the money.

Delta can't make a bid for six months if it misses the Nov. 8 deadline. Tesco Plc surpassed Sainsbury as Britain's largest grocer in 1995. Wal-Mart Stores Inc.'s Asda chain is No. 2.

Shares Drop

``We still continue to engage with them on a constructive basis,'' said Sainsbury spokeswoman Gillian Taylor. ``We thought it was right to advise the market. We are actively working together with a view to securing an offer.''

Sainsbury shares fell 18.5 pence, or 3.2 percent, to 565.5 pence in London. Delta Two offered 600 pence a share for the company in July. The shares are still up more than 40 percent this year on takeover speculation.

Jonathan Brill, a Delta Two spokesman, declined to comment. The fund signed a confidentiality agreement with Sainsbury trustees a month ago and has been discussing pension-plan funding since then.

A bid from buyout firm CVC Capital Partners Ltd., was scuppered earlier this year after opposition from the founding family, who own an 18 percent stake.

``The fact that they chose to bring this news to the market seems to suggest some element of doubt,'' said Andrew Wade, a London-based analyst at Seymour Pierce. ``We're still pretty sure it's going to go ahead.'' He rates the stock ``hold.''

Credit Crunch

Delta had already increased the equity portion of the deal to 4.85 billion pounds from 4.6 billion in July. The fund raised the amount of ordinary and preference shares by 850 million pounds, and cut the number of so-called pay-in-kind notes.

Since the original July approach, turmoil in the credit markets has derailed a world merger and acquisition boom that peaked in August. The credit crunch sent stock markets sliding and has limited buyout funds' access to debt.

Sainsbury said on Oct. 10 that revenue growth slowed in the second quarter after the wettest U.K. summer on record cut sales of drinks, barbecue food and clothes.

The chain is close to the end of a three-year plan to increase earnings and take back market share from rivals. The retailer's first-quarter sales growth outstripped Tesco after Sainsbury cut prices and expanded its range of organic produce.

Gas Earnings

Qatar, home to the world's biggest gas field, plans to invest 3.5 billion pounds building and renovating the stores. Persian Gulf oil producers earned as much as $500 billion from energy sales last year, and are recycling some of those funds into overseas assets.

Qatar bought a 20 percent stake in London Stock Exchange Group Plc last month, while Dubai agreed to buy a 19.99 percent stake in Nasdaq and 28 percent of the LSE, as the two battle to become the region's leading financial center. The Qatar Investment Authority, which backs Delta, had $40 billion of assets in mid-2006, Pacific Investment Management Co. estimates.

The grocery chain was founded in 1869 by John James and Mary Ann Sainsbury with a shop on London's Drury Lane. Sainsbury was wholly owned by members of its founding family until 1973, when the retailer first sold shares in London.

To contact the reporter on this story: Loveday Morris in London at lmorris7@bloomberg.net

Last Updated: October 26, 2007 11:48 EDT