UPDATE 1-Buyout firms fight Dutch retailers for C1000 -sources
* Bain, BC Partners in second round of Dutch grocery auction -sources
* Rival retailers Jumbo, Sperwer Holding picked to bid again -sources
* Sale could fetch up to 1 bln euros for seller CVC -sources
By Simon Meads
LONDON, Nov 2 (Reuters) - Two private equity firms are squaring up against domestic retailers in the 1 billion euro ($1.4 billion) race to buy the Netherlands' number two supermarket chain C1000, people familiar with the situation said.
Bain and BC Partners have been taken into the second round of the sale process, where they face Dutch groups including Jumbo and Sperwer Holding, owner of the Plus supermarket brand, two of the people said.
Another unnamed local rival is into the second phase of the auction, the people said.
C1000's private equity owner CVC is hoping the chain, which has a market share of about 12 percent, will fetch 900 million to 1 billion euros, the people added.
While interested in bolstering its dominant position in the Netherlands, Ahold , owner the Albert Heijn grocery chain, is unable to acquire the business because of competition issues, two of the people said.
Dutch food group Sligro , which supplies large-scale caterers and restaurant chains as well as operating the EMTE supermarket brand, had been eyeing C1000, according to reports.
The groups named either declined to comment or were unavailable for comment.
CVC bought Ahold's 73 percent stake in C1000 parent group Schuitema in 2008 in a deal valuing the business at 950 million euros.
Should a sale fail to meet its targets, CVC could opt to recapitalise the supermarket group instead, bankers previously said.
The private equity contenders in the sale face a tough market for financing large deals and the prospect of fierce competition from the Dutch grocery groups who are keen to make inroads into Ahold's 30 percent plus market share.
Jumbo beat Sperwer to buy the Super de Boer supermarket chain two years ago for 550 million euros, when France's Casino exited the market. It then agreed to sell 80 stores to C1000 in a side deal.
Both Jumbo and C1000 operate a largely franchise model, targeting the budget end of the grocery market.
C1000 has some 400 stores, of which 380 are operated under franchise and 20 are directly owned. The bulk of its business, which generates some 4 billion euros a year, according to CVC's website, is as a wholesaler to the franchised estate.
CVC sold C1000's six logistics facilities to investment firm W.P. Carey earlier this year for 155 million euros in a sale and leaseback deal.