EUROPE - In the latest round of an aggressive game of brinkmanship, Swiss retailer Jelmoli is to sue Delek for breach of contract after the London-listed Israeli property firm's pulled out of a deal to acquire Jelmoli's 88-property Swiss portfolio.

The planned CHF 3.5bn (€2.8bn) acquisition - which would have been one of Europe's largest recent transactions - collapsed last month when Delek pulled out, citing the rising cost of credit, after Jelmoli refused to lower its asking price.

A Jelmoli source has dismissed Delek's stated reasons for withdrawal, pointing out it had the financing in place for the deal.

"They went back and said the price was too high but not long before they had been boasting in the Israeli press about what a fantastic deal it was," the source said.

Jelmoli believes Delek's backing out of the deal was a last-minute attempt to bring down the asking price. In return, it has filed a suit against the Israeli firm for fulfilment of the deal at the headline price.

It is more likely it will accept a compromise offer - though it has been reticent on what an acceptable alternative might look like.

In the meantime, an official statement from the retailer claims Delek's withdrawal is "without basis in the purchase agreement….a blatant breach of contract" and "an event of abuse that is unheard of in Switzerland".

Delek spokeswoman Kate Newton declined to comment on the latest gambit, but said: "I wasn't a surprise to hear Jelmoli was to taken legal action because they've been threatening to for a while but we've received nothing from them. It would be inappropriate to comment until we do."