Feb. 28 (Bloomberg) -- Marks & Spencer Group Plc Chief Executive Officer Stuart Rose said he's considering bidding for J Sainsbury Plc, Britain's third-biggest supermarket chain.

Rose, who runs the U.K.'s largest clothing retailer, said he was speaking to customers about an offer for Sainsbury, which has a market value of 8.8 billion pounds ($17 billion). ``You do get quite an interesting response,'' he said in a presentation to a London conference held by Retail Week magazine today.

His remarks follow three weeks of speculation that Marks may seek to buy Sainsbury to create a retailer with more than 1,000 outlets. An offer may spark a bidding war with CVC Capital Partners Ltd., Blackstone Group LP and Kohlberg Kravis Roberts & Co., which said Feb. 2 they were considering an offer for Sainsbury in what would be Europe's biggest buyout.

``Assets like this don't come on the market very often,'' Rose said today. ``The company is effectively in play. Your shareholders would think you were an idiot if you didn't consider it. Watch this space.''

Marks said in an e-mailed statement following Rose's remarks that its board had considered bidding for Sainsbury and didn't intend to make an offer ``at this time.'' The retailer said it reserved the right to announce a bid or possible bid within the next six months if Sainsbury's board recommends an offer or if a ``firm'' approach by the CVC group or another suitor is made.

Property Partner

Sainsbury shares have surged 15 percent since the private- equity companies said they were interested in the retailer. Spokeswoman Pip Wood declined to comment to Bloomberg today.

For a transaction to work, Marks would need a partner to buy Sainsbury's property, enabling the company to acquire the operating grocery business relatively cheaply, Numis Securities' Steve Davies has said. Marks might achieve 300 million pounds of cost savings from a deal, according to Davies, who estimates Sainsbury's property is worth 7.5 billion pounds.

Sainsbury Chief Executive Officer Justin King has cut prices and added fresh food to halt three years of declining profit and stem a loss of market share to larger rival Tesco Plc, which has more than 3,000 U.K. outlets.

London-based Marks & Spencer is 18 months into a recovery that followed two years of declining same-store sales. Rose has also expanded his company's range of fresh food, as well as commissioned renovated stores and revamped women's fashions.

`Glass of Wine'

``Stuart Rose has got to think where the next leg of his growth is going to come from,'' Chris Gower, an analyst at Man Securities in London, said today. ``It's a good strategic fit. They have a fairly similar customer base as Sainsbury, and a fairly strong brand in the middle market.''

Marks & Spencer would also have to overcome hurdles from antitrust regulators if it were to buy Sainsbury, analysts including Gower have said. William Morrison Supermarkets Plc, which bought Safeway Plc in 2004 to become Britain's fourth- largest food retailer, was forced by regulators to sell stores.

``It's one thing talking about something over a glass of wine,'' Rose said today of a possible bid. ``It's another thing going down that road.''

Combination Risks

Some analysts have said a combination between the two brands could be risky. The different product offerings and images may alienate customers, Deutsche Bank AG's James Collins said in a Feb. 22 report to investors. Sainsbury offers a full food range at competitive prices, while Marks's food is limited and highly priced, he said.

``Marks & Spencer shoppers might feel their brand would be cheapened,'' he wrote. ``Sainsbury shoppers would be quick to accuse it of becoming too expensive whenever it pushed through any price rises.''

Marks & Spencer, which owns more than 400 stores across the U.K., has added stand-alone food outlets known as Simply Food and delicatessen bars and cafes in other stores. Food makes up about 50 percent of the company's total sales.

Marks controls 11 percent of the U.K. clothing market, with Wal-Mart Stores Inc.'s Asda in second place at 8.2 percent, followed by Tesco at 8.1 percent, according to Taylor Nelson Sofres Plc. Sainsbury's share is about 1 percent.

A takeover of Sainsbury by private equity companies would probably top the 11.8 billion-euro acquisition of Danish phone company TDC A/S in November 2005, currently the biggest European private-equity purchase. It would also be the first buyout of a company in Britain's benchmark FTSE-100 index.

Marks & Spencer held internal talks about a possible bid for Sainsbury, London's Times newspaper reported Feb. 7, citing unidentified people within the retailer. The Sunday Telegraph newspaper said Feb. 18 Marks had discussed jointly bidding with funds backed by the Persian Gulf state of Qatar.

Marks shares fell less than 0.1 percent to 675 pence today, giving the company a value of 11.5 billion pounds. Sainsbury shares fell 6.25 pence, or 1.2 percent, to 511.25 pence.

To contact the reporters on this story: Neil Craven in London at ncraven1@bloomberg.net; Angharad Couch in London at acouch2@bloomberg.net

Last Updated: February 28, 2007 15:07 EST