The attempt by a consortium of private equity companies to take over J Sainsbury was close to collapse last night after two of the bidding partners pulled out of the deal and the supermarket chain's founding family rejected an improved £10.1bn offer.

The attempt by a consortium of private equity companies to take over J Sainsbury was close to collapse last night after two of the bidding partners pulled out of the deal and the supermarket chain's founding family rejected an improved £10.1bn offer.

The decison by Blackstone Group International and Texas Pacific Group to abandon the proposed deal left CVC Capital Partners as the only remaining bidder.

The departure of the two firms followed confirmation from buy-out specialist Kohlberg Kravis Roberts on Thursday that it had left the consortium.

A retail industry source said CVC was battling to keep the offer afloat but it looked unlikely that the private equity firm could pull it off.

Shares in Sainsbury, Britain's third-biggest supermarket group, fell by about 4% on speculation that CVC would be unable to raise the bid again on its own. The present offer still had three days to go until the Takeover Panel's "put up or shut up" deadline.

The food retailer's shares dropped 22.5p to 538.5p, dragging stock in other supermarket chains lower.

Sources familiar with the situation said Texas Pacific and Blackstone had left the bidding team even before CVC had proposed a new offer of 582p a share in cash, up 20p, or 3.6%, from its previous proposal.

Sainsbury would not comment on last night's developments, but a source close to its founding family - which owns about 18% of the shares - reiterated that it would oppose opening the company's books for a bid of less than 600p a share.

David Sainsbury, a former chairman of the firm, is the family's biggest shareholder with a 7.75% stake.

There has been speculation in the City that other shareholders, such as property magnate Robert Tchenguiz, agreed with the family position.

The battle for control of Sainsbury began on February 2, when the CVC team announced its bid plans.

Clothing and food retailer Marks & Spencer has said it would not rule out making a counterbid for Sainsbury, while sources close to the matter have said the UK's second-biggest grocery company, Wal Mart-owned Asda, was looking at whether it could get a possible bid approved by competition watchdogs.

Under a deadline set by the Takeover Panel, CVC has until Friday to say publicly whether or not it is bidding for Sainsbury.

CVC has offered Sainsbury employees 15% of the company, and another 25% of equity has been earmarked for other shareholders who would like to remain investors, said sources familiar with the matter.

The private equity firm is believed to have plans to create 16,000 jobs and expand store space by three million square feet, but it has not provided further details.

If completed, a deal would vie with a possible takeover of British drugs retailer and wholesaler Alliance Boots to be Europe's biggest leveraged buy-out.

Alliance Boots is also being pursued by cash-rich private equity firms, which are taking advantage of cheap borrowing costs to buy companies whose property assets and strong cash flows allow them to pay off debt quickly.

Sainsbury is attractive to would-be buyers because of its property assets, which some analysts estimate are worth more than £7.5bn, and also for its recovery potential as it fights back from a decade of underperformance during which it lost ground to Asda and market leader Tesco.

Analysts at Numis Securities said they believed venture capitalists could afford to pay 600p a share for Sainsbury.

However, Richard Ratner of Seymour Pierce, one of the City's leading retail industry experts, said a bid at 582p a share already looked like bit of stretch.

"We wonder whether the VCs (venture capitalists) are so flush with cash that they have to do a deal, or whether egos are dictating the pace," he wrote in a research note.