Shares in Somerfield have soared after the UK supermarket group revealed it had received a takeover approach.
Somerfield also owns the Kwik Save chain
The interest from a potential bidder comes at a time when the UK's largest supermarket groups are engaged in a battle to take over Safeway, the fourth biggest player in the domestic market.
Somerfield, which also owns the Kwik Save chain, declined to identify the potential bidder and said the proposal was subject to a number of conditions.
It said the approach was made last Friday but it was uncertain whether an offer would ultimately be made.
Speculation about the likely bidder centred on Baugur, the Icelandic retailer that already owns 3% of the company.
Somerfield shares were up 22% after the announcement.
Somerfield, which operates 600 Somerfield and 700 Kwik Save stores, has a 5.5% share of the UK food market.
Some analysts have said the company might be an attractive target for a major retailer because of its network of smaller stores.
But analysts at Numis Securities said they thought the mystery bidder would more likely be a venture capital or financial buyer than another food retailer.
"Most of the big food retailers are currently engaged in proposed plans to acquire Safeway so it is unlikely they would be behind such a move.
"Besides, the attractions of buying Somerfield are different to those at Safeway," it said in a note to its clients.
Some analysts also said they expected Baugur would keep to its strategy of several smaller shareholdings - it also has a stake in Iceland-owner Big Food Group - rather than attempt to take control of one of the firms in which it has invested.
Somerfield is in the middle of a five-year restructuring plan, which involves refurbishing its stores.
It returned to profit in 2002 after three consecutive years of losses.
But its chief executive quit following a profit warning.
The battle for Safeway involves possible bids from Morrisons, Sainsbury, Tesco, Wal-Mart-owned Asda and UK retail entrepreneur Philip Green.