Private equity giants Fortress and Clayton, Dubilier & Rice (CD&R) must submit formal bids for the Bradford-based supermarket chain with the first round of five starting this Saturday.
A result will be announced by Monday morning, although the process could also be scrapped if either side state they will not increase their current offers.
It brings to an end a takeover saga that has dragged on since CD&R first made an approach for the Bradford-based grocer back in June, leading to speculation the sector was ripe for private equity takeovers.
Following the June bid, rival Softbank-backed Fortress made an offer of £6.3 billion in July.
However, shareholders felt this was too low and Fortress, which owns Majestic Wines, returned a month later with an increased offer of £6.7 billion in August, which the board accepted.
Later that month CD&R returned with an increased bid of £7 billion, leading to the board withdrawing their support for the Fortress bid and throwing its weight behind the higher offer.
A vote by shareholders on the CD&R bid, where former Tesco chief executive Sir Terry Leahy is an adviser, is due on October 19.
The Takeover Panel said: “On the basis that neither offeror has declared its offer final, such that either offer may be increased or otherwise revised, a competitive situation continues to exist.”
It said each party will now be subject to an auction where either side may make an increased bid.
If no bids are made, there will be up to three further rounds where either side can make an offer only if the other side made an increased bid in the immediately preceding round.
If no increased bids are received, a final round will run to allow for one last chance at a deal.
Both sides have agreed all bids will be at a fixed cash price and cannot include stakes in other businesses or dividends to shareholders.
If both sides are still bidding by the final round, Fortress must make its bid-per-share with an even number and CD&R with an odd number, to avoid the bids being the same.
The results will be published by Monday morning at the latest.
However, if either side makes a “no increase” statement before the end of the week, the auction will be cancelled.
Both sides have been keen to stress they want to uphold the values of the late Sir Ken Morrison, who turned Morrisons into one of the biggest supermarkets in Britain.
They have attempted to ward off suggestions they will start selling off vast swathes of the company’s freeholds.
Supermarkets typically lease properties, whilst Morrisons continues to own around 90% of its estate.
There have also been concerns that any new owner may reduce the supermarket’s tax bill, with off-shore shell companies set up ahead of the takeover.
Morrisons’ pension trustees will have to be consulted, although earlier this month they said an agreement had been reached with (CD&R).
UK supermarkets have been buoyed by the pandemic over the past year as sales were boosted by the closure of non-essential shops and hospitality firms.
Nevertheless, Morrisons was among grocers to post lower annual profits after being hit by high pandemic costs.
The Bradford-based retailer was founded by William Morrison in 1899 as an egg and butter stall in Rawson Market.
Morrisons steadily expanded and became a publicly listed business under the leadership of Ken Morrison in 1967, listing on the London Stock Exchange.
It expanded further in 2004 with the £3.3 billion acquisition of rival Safeway, which helped the northern-focused retailer to grow further south.
The group has remained publicly owned since 1967, with the firm now largely owned by a raft of institutional shareholders, including Silchester International, Columbia, Blackrock and Schroders.
Morrisons has been led by chief executive David Potts since 2015, alongside chief operating officer Trevor Strain, and chief finance officer Michael Gleeson.
Morrisons appears an attractive opportunity for private equity as its share value had recently sat below its pre-pandemic levels despite strong recent revenues.
Thin margins and rising costs have continued to press down on valuations in the supermarket sector, fuelling regular speculation for potential takeovers.
Nevertheless, Morrisons has significant ownership of parts of its supply chain and a large property portfolio which will appeal to possible buyers.
A Yorkshire MP has been seeking written assurances that Morrisons will continue to pay UK corporate taxes if it is bought by a private equity firm.
Kevin Hollinrake, the Conservative MP for Thirsk and Malton, said he planned to write to Sir Terry Leahy, the former Tesco boss who is leading the bid from Clayton, Dubilier & Rice (CD&R), to ask him to set out clearly his plans for Morrisons.
Mr Hollinrake told The Yorkshire Post: "I am not against private equity investment but we have to make sure they do not benefit from any in-built tax advantage. We must do more to establish and maintain a fair and level playing field for all businesses that operate in the UK."
Last weekend, a spokesman confirmed that Morrisons will continue to pay taxes in the UK if it is taken over by CD&R.
CD&R has reiterated that Morrisons' head office will stay in Bradford if its bid is successful.
A spokesman said: "Should CD&R assume ownership of Morrisons, the company will remain headquartered and registered in the UK and continue to pay taxes in the UK."