United Co-operatives, the owner of the Co-op convenience store chain, has abruptly pulled out of the £1 billion plus battle to buy Somerfield, Britain's fifth-largest supermarket group, leaving two other bidding consortia still in the running.

Having reported early last month that it was "exploring the possibility of making an offer" for Somerfield, rumoured at about 205p a share, United Co-op said this morning that it has "now decided not to proceed".

But Britain's largest independent co-operative society - with nearly 1,000 outlets and group sales last year of more than £1.9 billion - reserved the right to re-enter the fray if a firm bid emerges from a rival.

In an equally terse statement to the Stock Exchange this morning, Somerfield said: "Discussions with other bidders continue."

A spokesman for United Co-op told Times Online that the group had withdrawn its interest in Somerfield for a number of reasons, including timing. It is understood that the Co-op had not reached the stage of deciding on a firm price to offer for Somerfield.

"We took a look at the opportunity. After careful consideration of all of the issues involved, we decided that it wasn't a deal that we could do now. We took the mature decision in the circumstances," the spokesman said, reiterating that United Co-op still wants "to grow our business".

Shares in Somerfield rose 0.25p to 190.25p in early trading as dealers digested the implications of the Co-op's withdrawal. Analysts have said that United Co-op was not a lead contender to buy Somerfield. Because it is unlisted, it would not have been able to raise cash from the equity markets to back its interest in the group.

Today's withdrawal by United Co-op leaves two other bidding consortia still interested in taking over Somerfield. Baugur, the Icelandic retail investment group, first approached the supermarket group in March, with a 190p bid that valued Somerfield at just over £1 billion. That bid was later rejected.

Baugur, which has a reputation as an aggressive corporate raider and recently snapped up Iceland, then teamed up with a rival bidding team composed of Apax, the private equity group, and Barclays Capital, the investment banking arm of Barclays bank. This group also contains Robert Tchenguiz, the property developer.

Ian and Richard Livingstone, the property tycoons, are leading the second interested consortium.

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