Erinaceous, the UK property services company that is considering a sale, has lost one of its possible bidders after 3i, the private equity firm, withdrew from the race.
HBOS is still seen as the frontrunner but could yet be trumped by Vincent Tchenguiz, the property investor.
3i was the first to express interest in Erinaceous in April. It has since put in a low offer as an insurance policy in case other bidders walk away, but has no plans to make a more competitive bid.
It is unclear whether Bridgepoint, the second private equity firm in the running, is still interested in taking on HBOS.
HBOS has significant interests in the housing sector. Earlier this year it bought Crest Nicholson for £715m in conjunction with Sir Tom Hunter, the Scottish entrepreneur, and last year it bought retirement home builder McCarthy & Stone for £1.1bn in a consortium with Sir Tom and the Reuben brothers.
People close to Erinaceous confirmed that 3i had made a low offer, but denied that the private equity group was completely out of the running.
3i contacted Erinaceous a few weeks before the other bidders and is thought to have completed initial due diligence well in advance of its rivals. The other three bidders are thought to be still going through the books.
Shares in Erinaceous were down 5p, or 1.84 per cent, at 267p in midday trading on Tuesday, giving the group a market capitalisation of £286m.