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UPDATE 2-Auchan, Intermarche in buying alliance talks with eyes on Casino's French stores

(Adds details)

By Dominique Vidalon

PARIS, Dec 5 (Reuters) - Auchan and Intermarche are in talks to form a purchasing alliance, reflecting their increasingly close ties a week after making a joint bid for the French hypermarkets and supermarkets that debt-laden rival Casino is seeking to offload.

The long-term alliance would cover buying food products from national brands as well as non-food products, Auchan and Intermarche said in a joint statement on Tuesday.

It would complement an existing purchasing alliance in food and non-food between Intermarche and Casino, they added.

Adding Auchan's market share of around 9% to the Intermarche-Casino ensemble, the new alliance would be a major force negotiating prices with suppliers, with nearly 30% market share, well ahead of Leclerc's 23.7% and Carrefour's 20.4%.

News of the alliance came as Casino unions staged demonstrations in Paris and at its historic Saint-Etienne headquarters in central France amid fears the group could be dismantled.

Casino, which has issued two profit warnings in recent months due to the worsening situation at its hypermarkets, is racing to complete a bailout deal to avoid bankruptcy early next year, at which point Czech billionaire Daniel Kretinsky will take control of the group.

Casino said last week it had received preliminary, indicative offers from several purchasers for an unspecified number of hypermarkets and supermarkets it had put up for sale.

Intermarche already agreed to buy about 61 stores from Casino in May. It has an option, exercisable within three years, to buy a second group of 72 stores.

A source close to the matter told Reuters on Tuesday that at this stage "most players on the French retail market", including Leclerc, had expressed interest in the sale process.

Potential candidates for Casino's stores also include Carrefour and German discount group Lidl.

"The idea is to try to have something done in 2023," the source said of the timetable for bids.

Last week, Auchan Retail board member Serge Papin told BFM Business that Auchan and Intermarche had submitted a joint bid for all the stores Casino is looking to sell to raise cash.

The sale of the hyper and supermarkets, if completed, would sharply reduce Casino's size to some 8 billion euros in sales from 33.6 billion euros in 2022, halving its market share in France to around 3%, Barclays analyst Nicolas Champ estimates. (Reporting by Dominique Vidalon; Editing by Alexander Smith and Mark Potter)