Safeway yesterday formally threw itself open to all bidders as it withdrew its recommendation for the £2.5 billion (€3.77 billion) offer from Sir Ken Morrison.

The supermarket group said it was forced to act after its share price continued to rise on speculation of a counter-bid while that of WM Morrison Supermarkets had fallen.

Safeway's decision leaves the way clear for the five potential bidders to try to get any offers they choose to make recommended.

And it will increase pressure on Sir Ken who is due to formally issue his offer document next week to sweeten his bid with a cash element. The move, following increased signs that retail entrepreneur Philip Green is set to make a cash offer, increases the pressure on all the would-be bidders to act and may lead to alliances between some.

Extra pressure will come with the news that Kohlberg Kravis Roberts, the US buy-out specialist, was last night moving to firm up its financing.

It is understood to be looking to raise more than £4 billion and is trying to get five banks in a syndicate.

The firm is considering a full bid for Safeway, but could also link up with one of the supermarket bidders to increase the trade buyer's chances of getting competition clearance.

Shares in Safeway yesterday fell 5½p to 316p. This leaves them at a 25.7 per cent premium to the Morrison bid, which last night stood at 235p a share as Morrison shares fell 4½p to 178p.

Mr David Webster, Safeway chairman, said the group's board had decided to act after the emergence of possible counter-offers from rivals J Sainsbury, Wal-Mart/Asda and Tesco and financial bidders Mr Green and KKR. - (Financial Times Service)