Manchester’s Co-op Group has begun exclusive talks with Scunthorpe-based convenience grocer Nisa to discuss a possible deal to buy the mutually-owned retailer for up to £140 million.

Co-op Group had been in a bidding war with Sainsbury’s for the mutual — but the Sainsbury’s talks stalled following concerns over possible intervention from the UK’s competition watchdog.

Any transaction would have to be approved by 70% of Nisa’s more than 1,300 members.

Nisa chair Peter Hartley told the mutual’s members in a letter: “In line with the Board of Nisa’s duty to act in the best interest of all Nisa members, your board has granted the Co-op a period of exclusive due diligence from today [30 August].”

Hartley said: “Should an offer of merit emerge from this process, it will be for you, the members, to decide on whether to accept it.

“However, it is important to stress, that there is no guarantee that an offer will be forthcoming.”

A Co-op spokesman said: “We can confirm that we’ve entered into a period of exclusivity with Nisa, which will provide the opportunity for us to carry out more detailed due diligence in the coming weeks.

“After this period and subject to approval from our board, we hope to be in position where we can put forward an offer to Nisa members.”