Britain's biggest supermarket chain today said it was preparing to join Morrisons in the battle for Safeway.

Tesco said it was considering a part-cash, part-share bid and added the offer would be "compelling to Safeway shareholders".

The move by Tesco means five firms are now battling it out for Safeway.

Bradford-based Morrisons started the bidding war with an initial £2.9 billion offer. That offer fell to around £2.6 billion after its share price dropped following its initial announcement.

Sir Terry Leahy, Tesco's chief executive, said: "We are a consumer champion, we successfully run a diverse range of store types and have a world class management team. We therefore believe the interests of consumers would be best met if Tesco led any restructuring."

Just days ago Bhs boss Philip Green revealed he was weighing up a bid for troubled Safeway.

Last week Sainsbury's said it was considering a part-cash, part-share bid of at least £3.2 billion, while Asda's US parent company Wal-Mart said it was lining up an all-cash deal.

Tesco has a market share of around 25.8 per cent, while J Sainsbury has 17.2 per cent. Asda has a market share of 16.6 per cent, while Safeway is currently the UK's fourth largest grocery chain with a market share of 9.8 per cent.

Industry insiders believe Morrisons, which is the fifth largest supermarket group in the UK with a six per cent market share, would face the least opposition from competition authorities over its proposed merger.

Sir Terry added: "This is not a defensive move. Tesco has never been defensive, everything we have achieved has been on the offensive, it's a positive move.

"We have watched the situation very closely and thought a lot about it, what we could see was the authorities were being asked to consider a major restructuring of our industry, going from four national players to three.

"In these circumstances it's important the Tesco case is heard."

David Stoddart, retail analyst at Teather & Greenwood, said he was not too surprised by Tesco's decision to join the battle. He said: "At best it may hope to succeed and at worse it gets to muddy the waters for the others," he said.