Breaking News on Food Marketing and Retailing

More bidders emerge for Safeway

14-Jan-2003

Related topics: Financial, Retail

Britain's number four food retailer is clearly coveted by a number of companies. Last week's announcement of a recommended bid for the chain by smaller rival Morrisons has prompted a number of other possible bidders to emerge from the shadows.

Yesterday we reported that Sainsbury had made a counter offer for Safeway - which it has obviously been eyeing for some time - trumping the Morrisons bid and valuing Safeway at around £3 billion.

 

Now Wal-Mart, the world's largest retailer and owner of the UK's third largest chain, Asda, has confirmed its interest in Safeway. The US group said it was considering making an all-cash offer for the chain - compared to the all-share bid from Morrisons and the part-share, part-cash offer from Sainsbury.

 

Commenting on the possible bid, Tony De Nunzio, Asda's president and CEO, said: "We're Britain's favourite supermarket and the number one company for which to work. Getting stores in parts of the country where we're under represented means we can meet the pent-up demand of people who want our everyday low prices - 12 per cent lower than the average supermarket."

 

While Morrisons bid is likely to be approved immediately by the competition authorities - since its stores complement rather than compete with Safeway's - both Sainsbury and Wal-Mart face the prospect of lengthy negotiations to appease the regulators.

 

Sainsbury said in its statement yesterday that it believed the sale of 90 stores would be enough to win approval for its takeover offer, while Wal-Mart has said it will discuss its potential offer with the Office of Fair Trading to ensure that clearance will be forthcoming.

 

But there is also the possibility of a bid for Safeway from outside the UK food retail market. Press reports claim that the US-based buyout specialist Kohlberg Kravis Roberts (KKR) is also interested in bidding for the chain.

 

The Times newspaper said that KKR would table an offer this week, possibly in association with Wal-Mart and presumably in order to head off potential criticisms from the OFT.

 

For their parts, both Morrisons and Safeway have remained tight-lipped about the rival bids. Morrisons said simply that its offer was just one of several on the table, and that while it believed it would create a group which could compete on a truly level footing with the UK's three other major players, it was ultimately up to Safeway's shareholders to decide.

 

Safeway itself was even less forthcoming, saying simply that it would consider all the offers it received and comment on them in due course. However, it has been stoic in its refusal to accept potential offers from both Sainsbury and Wal-Mart/Asda in the past, and the fact that the Morrisons bid has already been agreed will surely stand in that company's favour.