Financial analysts believe Asda could put in a counterbid for Sainsbury’s following an offer from a private equity consortium.

According to news provider Reuters, Citigroup said that Asda would be in a position to convince competition authorities it was a better match for Sainsbury’s than the private equity team currently looking to enter a bid.

“We maintain that the market is overly optimistic about a consortium bid, but if one comes, watch out for a higher offer from Asda,” analysts said in a research note this week.

Citigroup said a bid is “less likely than likely”, but that an offer from a consortium could “strengthen its argument” with regulators.

By buying Sainsbury’s Asda could potentially create a realistic competitor for Tesco, which, at double Asda’s size, dominates the grocery market.

Analysts wrote: “The Competition Commission has stated it is worried that Tesco is so big that no competitor can emerge to challenge it. If the Commission fears a monopoly situation, it may settle for a duopoly.”

Asda ceo Andy Bond has declined to comment on a possible bid, however, he is reported to have said that the retailer may consider acquiring convenience stores.

Private equity firms CVC, Kohlberg Kravis Roberts and Blackstone Group announced they were considering an offer for the UK’s number two retailer earlier this month.

At more than £10 billion, a bid would be Europe’s largest leveraged buyout, according to Reuters.