Sainsbury's has had trouble getting the formula right

The retailer's shares closed up 9.5p, or 3.7%, at 265.25p.

Allan Leighton, the ex-boss of rival chain Asda, has reportedly approached members of the Sainsbury family, who control one-third of the shares.

The price tag for a full takeover could be as high as �8bn ($14.7bn), analysts have speculated.

Sainsbury's has refused to discuss the possibility of a bid, but is widely seen as a takeover target.

The company has consistently lost market share against sector leader Tesco, despite numerous attempts to realign its strategy.

Sniffing around

Monday's jump in Sainsbury's shares, on the back of very large trading volumes, is reportedly being driven by being seen as a sign of interest among investment funds.

Follow the ups and downs of Sainsbury's share price

According the City rumour mill, a number of private equity groups have been running the slide-rule over Sainsbury's. UK firm Permira and US giant Kohlberg Kravis Roberts are among the investors linked with a deal.

Mr Leighton, who has managed a string of Britain's best-known businesses, has recently stepped back from some of its interests.

He is rumoured to be in league with Archie Norman, a Conservative MP and another former Asda boss. Mr Norman has denied that a bid is on the table.

"Obviously a lot of people have had the spreadsheets open, but whether it comes to anything remains to be seen," said David Stoddart, retail analyst at Teather & Greenwood.

Squeezed out

Sainsbury's, arguably Britain's favourite supermarket a decade ago, looks likely to dip into the red this year.

Mr Leighton is one of Britain's busiest businessmen

Two weeks ago, the company announced a �550m restructuring and recovery strategy.

It has been squeezed by increasing competition on price from retailers such as Asda, and the lost business in its traditional middle-class market to Tesco.