Sainsbury's confirms interest in Safeway

- Last updated on GMT

Related tags: Safeway, Asda, Tesco, Sainsbury's

The fate of Safeway, the UK's fourth-largest food retailer, still
hangs in the balance. An offer from smaller rival Morrisons was
accepted last week, but Britain's number two player, Sainsbury's,
has now trumped that bid - and a further counter offer could come
from Asda's owner, Wal-Mart.

Given the almost constant rumours regarding possible bids for the UK retail group Safeway over the last few months, it was almost inevitable that even once a sale had been agreed, the saga would continue.

Almost as soon as Morrisons announced last week that it had agreed with Safeway to buy the company, press reports began to talk of a possible counter bid from Sainsbury's and Asda, both of which had been mooted as potential bidders in the past.

While Asda is yet to comment, Sainsbury's at least has confirmed that it is interested in making a counter bid for Safeway. In a statement issued this morning, the company said that it was preparing a cash and share offer for Safeway which would value that company's shares at more than 300 pence, compared to the 277.5 pence bid from Morrisons, and the whole deal at more than £3 billion.

In the statement, Sainsbury's said that it had "long believed that a combination with Safeway would produce substantial synergies, create value for shareholders and offer customers an improved proposition"​. It said that it had identified at least £300 million of cost savings arising from a combination of the businesses.

On the vexed question of approval for the takeover, Sainsbury's said that it would dispose of around 90 stores, which it believed would be sufficient to satisfy local competition issues.

.Sir Peter Davis, chief executive of Sainsbury's, said: "Over the past year we have looked at the possibility of combining with Safeway in order to offer more customers greater choice and a superior food proposition throughout the United Kingdom. Safeway's recent decision to relinquish its independence offers us a unique opportunity to acquire a large number of stores, which would enhance our strategic transformation."

Neither Morrisons nor Safeway have as yet commented on the proposed counter offer, but it seems unlikely that Safeway will change its mind and recommend the Sainsbury bid. A merger with Morrisons would be far simpler in terms of competition requirements - indeed it is likely to be approved by the Office of Fair Trading without reference to the Competition Commission - and this is likely to be a major factor in helping Safeway shareholders decide which bid to accept.

And Wal-Mart, the US-based owner of Asda, has not ruled itself out, either. It too is thought to be considering a bid for Safeway, but that would also involve a lengthy approval process from the Competition Commission.

Whatever happens, it seems the saga is still far from over.

Related topics: Market Trends

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