The private equity firm has withdrawn because of competition issues between Sainsbury's and the Boots retail operation. However, other factors including the potential price, issues with the pension fund and the position of shareholder Lord Sainsbury - whom KKR was thought to be keen to involve in the bid - are also understood to have contributed to the decision.
One source familiar with the situation said: 'If push came to shove, the Alliance Boots bid does not have as many insurmountable options.'
KKR and Alliance Boots deputy chairman Stefano Pessina raised their bid for Alliance Boots to£10.1 billion last week and were subsequently granted access to the company's books.
It is unclear whether KKR's withdrawal will affect any potential bid for the grocer. The consortium, which is being led by CVC Capital Partners and also comprises Blackstone and Texas Pacific, has until April 13 to decide whether or not to make an offer for the grocer.
Sainsbury's made no comment. KKR was unavailable for comment.
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