Asda has reportedly joined forces with Scottish frozen food chain Farmfoods to put in a £1.4 billion offer for Iceland.
The supermarket has so far refused to comment on the reports but it is understood to be competing against Morrisons and four private equity firms.
It is widely understood that if the bid was successful, Asda would sell around 200 of Iceland’s 800 stores to Farmfoods.
The same number of stores would be expected to be sold by Morrisons if it bought the chain in order to meet Competition Commission regulations.
Iceland has been put up for sale by Icelandic bank Landsbanki, which inherited its shareholding in the business from failed Icelandic retail group Baugur.
The company's Chief Executive and largest investor Mark Walker is also said to be considering a bid for the company with backing from pension funds and sovereign wealth.
He has the sole right to match any bid put in for Iceland, However, his £1bn offer was rejected earlier this year.
In other Asda news, the supermarket has announced a new long-term strategic partnership with Leiths School of Food and Wine.
Leiths, set up in 1975 will create and develop Asda's 'extra special' premium own-brand range of groceries and wines.
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