Former Safeway chief executive Carlos Criado-Perez plans a dramatic return to UK retail by acquiring 120 small Safeway stores from Morrisons, it is understood.
He is said by industry sources to have teamed up with former Safeway trading director Jack Sinclair. The pair are courting private equity firms, such as KKR, to raise finance for the deal.
Analysts believe that the 120 small Safeway stores, all less than 15,000 sq ft (1,395 sq m), could go for about£600 million.
Last month, Morrisons sent out information packs on the 120 stores to interested parties. Potential buyers include Waitrose and the Co-operative Group, while Tesco and Sainsbury's may want to pick up a tranche for their convenience divisions.
One informed source said: 'The key thing is whether Carlos and Jack could raise enough capital to meet Morrisons' price.'
It is likely Criado-Perez would seek to keep the Safeway name. Analysts said that Morrisons would demand a substantial sum for this.
RW Baird retail analyst Paul Smiddy said Morrisons might prefer to sell the shops to what would effectively be a new business, rather than to multiple rivals. He added: '120 stores is not a scale business. It would have to be a premium-priced convenience chain, but Carlos is no stranger to premium prices.'
Morrisons initially planned to keep the smaller Safeway stores and brand them Safeway Compact, but has no experience in operating stores of that size. Shore Capital analyst Darren Shirley believed the 120 shops generate a turnover of about£1 billion.
No comment was available from Morrisons.