A takeover of Somerfield edged closer last night after it emerged that talks between the British supermarket chain and its suitor, the Co-op, were progressing despite disagreements over price.

It is understood that after a deadlock, talks between the two sides are moving forward, although any deal could still be several weeks away.

Somerfield put itself up for sale at the start of the year after an approach from Asda, the supermarket giant owned by Wal-Mart. Several suitors had initially expressed interest in parts of the group but only one bidder, the Co-op, submitted a proposal for the business, part-owned by Robert Tchenguiz, the property tycoon, before a March 14 cut-off point. But the talks between Somerfield and the mutually owned Co-op have stalled after sources said that Somerfield told the Co-op that it needed to come up with a higher price.

Mr Tchenguiz and Somerfield’s other owners, Apax, the British private equity group, and Barclays Capital, are believed to have put a price of £2 billion to £2.5 billion on the food retailer, but bidders say their expectations are too high given the crisis in global financial markets, which has caused asset prices to fall and at the same time made it much more difficult for the bidders to secure financing. The Apax-led consortium bought Somerfield in 2005 for £1.1 billion.

The deal has further been delayed by tensions between Somerfield’s owners, with Mr Tchenguiz keen to sell his third stake given losses on his holdings in J Sainsbury, Mitchells & Butlers and others. However, the private equity groups say Somerfield is trading well and they are not eager to sell.

“We are hoping they will come back with a higher price,” a source at one of the private equity companies said. It is thought that the Co-op offered well below £2 billion for Somerfield. The Co-op runs more than 2,200 convenience stores and supermarkets in the UK, generating more than £4 billion of revenue, but bankers wonder where it would raise funds for such a bid when banks are reluctant to lend.

If a bid with the Co-op is announced, it is likely that the other supermarket bidders will look to strike deals with the mutual for certain stores. Asda would like some or all of Somerfield’s 200 or so bigger outlets but any bid on its own would doubtless spark a competition inquiry. Some, like Tesco, have struck opportunistic deals with Somerfield for small numbers of stores. Somerfield controls less than 4 per cent of the market. There have been signs of a turnaround at the group, with Paul Mason, the chief executive, saying that the company had enjoyed an exceptional Christmas.

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