The Co-operative Group will have to raise its offer to buy Somerfield, which could result in a Competition Commission inquiry.

Somerfield’s owners have put a price tag of between£2 billion and£2.5 billion on the 900-store chain, but Co-op’s provisional first-round bid is thought to have been below that. This week, a source close to Somerfield said: “It has not come up with a suitable price.” He confirmed that the Co-op’s was the only firm bid on the table.

This week, the Office of Fair Trading told Retail Week it would investigate a potential acquisition of Somerfield by Co-op.

A successful bid would increase Co-op’s grocery market share to about 8 per cent. Somerfield has a 3.6 per cent share and all the UK Co-ops combined have 4.4 per cent.

However, CACI associate director of location strategy Paul Langston believes Co-op would have to dispose of about 37 stores on competition grounds, if a bid was forthcoming.

Langston also said that Tesco could get its hands on far more Somerfield stores than most industry experts believe, based on a relative low concentration of both chains in some areas.

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