Morrisons is looking to raise £600 million in a property-backed deal as it hopes to strengthen its balance sheet and fight back against German discounter Lidl, Sky News has reported.

The supermarket is reportedly in talks with US property investor Realty Income, as well as several other parties, over a deal to raise funds through a deal involving its stores. It is understood that the deal is unlikely to be structured as a sale-and-leaseback agreement, instead taking the form of secured financing backed by the company’s estate.

This would allow Morrisons to maintain ownership of its stores provided it is able to repay its loans.

The company previously employed real estate advisor CBRE to evaluate options to raise up to £1 billion through deals involving its freehold store portfolio, Sky News reported in February.

The incentive for the push is its desire to take back its spot as the fifth-largest supermarket in the UK after it was taken by Lidl in May. Worldpanel by Numerator figures show that Lidl hit an 8.6 per cent market share in the 12 weeks to 17 May, beating out Morrisons 8.3 per cent for the first time.

Morrisons was one of three supermarkets to respond to a consultation in May over whether Aldi and Lidl should be considered larges supermarkets for the purposes of land deals. In its submission, Morrisons argued that the pair of German supermarkets should seen as such based on their own advertising.

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