Safeway claims it is worth £4.8bn and is looking for a bid of more than 300p a share from rival chain Morrisons.
The Business said Safeway based its bargaining position on the £574m valuation that property consultant DTZ put on the 53 stores Morrisons will have to sell on competition grounds.
The paper said Safeway believed no deal would be signed until well past Christmas.

Tesco will this week underline its dominant position in food retailing as it reports a 13.2 per cent rise in UK sales over the past 14 weeks.
The Observer reported estimates from JP Morgan that like-for-like sales would be up 6.3%, with 4% from convenience store chain T&S and 3% from new store openings and.

Tesco is selling a range of clothes under its Finest brand in 18 stores and will be expanded into further outlets if it proves popular, said The Sunday Times.

Sainsbury's new chief executive, Justin King, was looking at ways at his former job as head of food at Marks and Spencer to downgrade the quality of M&S’ ready meals.
According to sources for The Mail on Sunday, King brought in consultants to explore a range of options to make more money out of the high street giant's TV dinners.