THE £1.1 billion sale of Somerfield was in chaos this weekend after Jon Asgeir Johannesson, head of Icelandic investor Baugur, was charged with fraud.

Baugur is one of the most powerful retail investors in the UK, with large stakes in some of the best-known names in the high street. It is also a main player in a consortium preparing to bid for the UK’s fifth largest supermarket group.

More than 40 separate charges have been brought against Johannesson, members of his family and other Baugur executives after a long-running investigation by the authorities in Iceland.

Hedge funds and arbitrageurs have staked hundreds of millions of pounds on the Somerfield takeover. Last week its shares closed at 195½p — below the mooted 205p offer price — after United Co-operatives, a third possible bidder, withdrew from the race. Its withdrawal left in the battle just the Livingstone brothers, founders of property company London & Regional, and a rival consortium including Apax, Baugur, Barclays Capital and entrepreneur Robert Tchenguiz.

After being charged with fraud, Johannesson is believed to have offered to withdraw from the Apax-led consortium. There was speculation banks would be unwilling to lend money to Baugur while uncertainty over his future remained.

“If there is an issue I am sure Baugur will do the honourable thing and withdraw,” said one adviser who insisted the remaining members of the consortium would push ahead with its bid.

A decision is expected to be made in the coming days. Baugur was believed to have been providing 25% of the equity funding for the deal and other members of the consortium seemed far less sure that they could proceed without the Icelandic investor.

“Oh, God. I’ve been on holiday. I’m a bit lost,” said Tchenguiz when contacted by The Sunday Times this weekend. “I need to think before I say anything. We will still be bidding but we need to speak to Baugur. We need to get to the bottom of what is going on. I don’t know what to say.”

The charges — which have stunned Iceland — will also send shockwaves through the UK high street. Baugur employs hundreds of thousands of shop staff. The group owns Goldsmiths, the jewellery chain, Regent Street toy shop Hamleys, and Julian Graves health-food stores. It also has significant stakes in Iceland, the food retailer, and Mosaic, the fashion group that owns Oasis, Karen Millen, and Coast.

A spokesman for Baugur emphasised this weekend that Johannesson maintained his innocence. The investigation, he claimed, was politically motivated and Johannesson would be cleared of any wrongdoing.

The original police investigation was sparked after a former employee claimed that directors of Baugur had used company funds for their own purposes. The exact charges will be made public at a court hearing in Iceland on August 18. It could be a further two years before a possible trial.

Alongside Johannesson, charges have also been bought against Johannes Johannesson, his father, and Kristinn Johannesdottir, his sister. Two accountants of the company, Hilmar Jonsson and Anna Thordardottir, have also been charged as has Tryggvi Jonsson, the former group chief executive.

The charges are understood to include fraud and breach of accounting regulations and corporate law. Reports in Iceland suggest they relate to the acquisition of an Iceland-based retail chain, in the late 1990s.

The Johannesson family owns a 70% stake in Baugur, one of the largest private companies in Iceland, with interests in retailing and the media.

Baugur began investing in UK-based retailers after it banked a £65m profit from an investment in Arcadia, the retail group acquired by Philip Green for £850m in 2002.