American private equity group Clayton Dubilier & Rice is reportedly working on putting forward a second takeover bid for Morrisons (LON: MRW).
The firm will be lining up a financing package for an offer with JP Morgan, Goldman Sachs and BNP Paribas.
Last month, the supermarket came into play after refusing a £5.5bn takeover bid by Clayton Dubilier & Rice, saying that the offer was "far too low".
Clayton Dubilier & Rice has until mid-August to come back with a higher offer.
Apollo pulls out of bid for Morrisons
The Financial Times is reporting that Apollo, the New York-based private equity group which had announced its intentions to put in an offer for Morrisons within 48-hours after the supermarket had accepted an offer from rivals Fortress, will be withdrawing its solo bid and instead may join the consortium whose £6.3billion offer for the grocer was accepted earlier this month.
Fortress - owned by Japan's SoftBank - and its partners, Canada Pension Plan Investment Board and the billionaire US Koch family teamed up to fund the offer, which values Morrisons, including all debt, at £9.5bn.
Apollo said the discussions "may result in funds managed or advised by Apollo forming part of the investment group led by Fortress for the purposes of the Fortress offer. As a consequence of these discussions, Apollo confirms that it does not intend to make an offer for Morrisons other than as part of the Fortress offer."
It added: "Apollo notes Fortress's intentions regarding the Morrisons business and all its stakeholders …Should these discussions lead to any transaction, Apollo would be fully supportive of Fortress's stated intentions regarding Morrisons."
Morrisons has become an attractive takeover target because it has an 87% freehold ownership across its estate. The chain has its own food manufacturing sites, owns a fishing fleet and has had a long-term relationship with local farmers and suppliers.
It will be interesting to see if Amazon, a key Morrisons' partner, shows any interest. Morrisons' supply deal with Amazon could be a significant factor in this summer's biggest takeover battle. Amazon could buy Morrisons to turbocharge its offering in Britain's food business.
Amazon has yet to comment.