Sainsbury's and Walmart-owned Asda need the Competition and Markets Authority (CMA) to approve their combination without it demanding they sell off so many stores that it removes the rationale for the deal.

Sainsbury's chief executive Mike Coupe was asked about the prospect of store disposals being insisted on as a condition of clearance when he appeared in front of the lower house of parliament's Environment, Food and Rural Affairs Committee.

"I think it is likely," he said, adding that the CMA would not force store closures.

He was asked what the figure was for the number of markets in Britain where there are both a Sainsbury's and an Asda store.

"It will be more than 20 and less than 100 would be my guess," he said.

Asked if it would be more than 50, he said: "It depends on how you define the market – probably more than 50 but less than 100."

Sainsbury's and Asda have declined to say how many store disposals would make the deal unattractive. However, a source with knowledge of the situation has told Reuters a figure "into the hundreds" would likely kill the deal.

"MICKEY MOUSE FIGURES"

The appearance of Coupe and his counterpart at Asda, Roger Burnley, in front of lawmakers represents a cranking up of the scrutiny of the shock tie-up, which was announced in April.

If it goes ahead, the combined group will overtake Tesco as Britain's biggest supermarket group, with a grocery market share of 31.1 percent, according to the latest industry data.

Last month the CMA started a started a preliminary probe into the deal ahead of a formal investigation.

On Monday it said submissions received from rivals and suppliers had highlighted the threat to competition and had raised concerns about the impact of the deal on suppliers and the potential knock-on effect on consumers.

The combined group is seeking synergies of at least 500 million pounds ($659.3 million), 350 million pounds of which would come from savings when buying from suppliers.

Sainsbury's and Asda argue that suppliers will be able to grow their businesses as the combined group grows. They have said the deal will enable prices to be lowered by about 10 percent "on many of the products customers buy regularly".

Committee chair and Conservative lawmaker Neil Parish said Coupe and Burnley had provided "Mickey Mouse figures" to the committee as regards the impact on suppliers, and accused Burnley of talking "baloney".

Both executives told the lawmakers there was a misconception on the issue of suppliers.

They said the combined group was not looking to lower the cost prices of the goods it sells across the board by 10 percent.

"The money will come from the largest suppliers, the 150 suppliers who account for around 78 percent of our turnover... brand manufacturers who are hugely profitable, quite often not UK-based PLCs," said Coupe.

He said the savings would be invested in lowering the prices of items like tinned tomatoes, pasta, detergents and toilet rolls.

"I can categorically say that the synergy benefits on which the combination is predicated are not based on making 10 percent savings from individual suppliers," added Burnley.

(Reporting by James Davey and Paul Sandle; Editing by Jan Harvey)