The UK’s second largest grocer Sainsbury’s is reportedly being targeted for a takeover by an American private equity firm, amid mounting mergers & acquisitions in the grocery space.

Investment firm Apollo is running the rule over Sainsbury’s with an eye to making a possible bid in excess of £7bn having missed out on snapping up Asda last year, according to The Sunday Times

The New York-based Apollo is also reportedly weighing its options with regards to joining Fortress’ Morrisons consortium, who’s running battle with Clayton, Dubilier & Rice for the fourth largest grocer has sparked the latest round of private equity interest. 

Apollo’s interest in Sainsbury’s is thought to be exploratory and should it join Fortress in bidding for Morrisons, that likely preclude any standalone bid for the grocery giant. 

The private equity giant, which has over $88bn under management, last year invested $1.75bn in US chain Albertsons which owns Safeway. It reportedly sees opportunities in Sainsbury’s presence in wealthier parts of the UK and scope to improve efficiency by shrinking stores and adding automation facilities to handle online orders. 

Rumours of a takeover have swirled around Sainsbury’s since April, when its largest shareholder the Qatar Investment Authority sold £300m in shares to Daniel Kretinsky. 

Kretinsky, known as the ‘Czech Sphinx”, also owns stakes in French food retailer Casino and German wholesaler Metro. 

As a result of a possible takeover, Sainsbury’s shares are up 30% this year to £2.95, which has in turn forced those shorting its stock to abandon their bets.