Morrisons takeover battle will go to UK auction on Oct. 2

LONDON (Reuters) -A $9.5-billion fight for British supermarket Morrisons will be decided at an auction on Saturday, when two U.S. private equity groups will go head-to-head in up to five rounds of bids.

Britain's Takeover Panel said on Wednesday that Clayton, Dubilier & Rice (CD&R) and Fortress Investment Group had agreed to settle the matter in a one-day auction.

CD&R, a U.S. private equity firm, started its pursuit of Britain's fourth-largest grocer in June.

Softbank-backed Fortress entered the fray in July, winning the backing of the board of Morrisons for bids at 252 pence and then 270 pence a share.

CD&R returned to trump Fortress with a 285-pence offer, valuing the supermarket at 7 billion pounds ($9.5 billion).

Given that neither bidder had declared its offer final, the Takeover Panel said all of the parties had agreed to an auction process to decide the outcome.

Morrisons shares were trading up 1.3% at 296 pence in early trading on Wednesday.

The battle for Morrisons is the most high-profile amid a raft of bids for British companies this year, reflecting private equity's appetite for cash-generating UK assets.

With more than one bidder increasingly targeting one company, previously rare auctions have become more frequent.

The most recent on Sept. 22 resulted in a consortium of funds managed by Ancala Partners and Fiera Infrastructure paying 372 pence a share to buy waste management company Augean, a near 10% rise on the highest offer before the auction.

Other auctions set up this year to decide the fate of security firm G4S and pharmaceutical company Vectura were scrapped when one of the parties declared their bid final, a development that could still scupper the Morrisons tussle.

($1 = 0.7311 pounds)

(Reporting by Paul Sandle; Editing by Kate Holton and Bernadette Baum)