Wm Morrison, the supermarket group which is widely believed to be the leading candidate to acquire the UK's Safeway chain, may offer less for the company than its initial offer of £2.85 billion (€4.1bn), according to a report in the Financial Times.
The various bids for Safeway, from Morrisons, Tesco, Sainsbury and Asda, have been assessed by the UK's Competition Commission, whose report is now in the hands of the Department of Trade and Industry. The DTI is due to announce which bids will be allowed to proceed by the end of September, with only Morrison thought likely to get the nod - all the other chains are simply too large.
But the differing performances of Morrisons and Safeway over the last few months could prompt the Yorkshire-based chain to offer less for the company than it did at the start of the year - an offer which sparked the lengthy bidding process which is still going on.
According to the FT's article, such a strategy could be risky, with Safeway's shareholders likely to be unhappy at being offered less now than in January.
On the other hand, a lower bid would in fact be a better reflection of the relative performances of the two chains, and would leave Morrisons more cash for the inevitable restructuring and refit programme it would have to begin to bring Safeway's stores to something like the same level of profitability its own outlets enjoy.
The article also suggests that a lower bid might even be acceptable to Safeway's shareholders if it meant a speedy end to the sale process - after nearly nine months of speculation, the possibility of more delays as shareholders wait for a higher offer might be too much to bear, especially as the company's performance is only likely to weaken all the more if the sale is delayed.
Last month Safeway reported that the cost of the delay in selling the chain had cost it dearly in the latest quarter, with underlying profit in the three months to 30 June dropping 0.6 per cent at the same time as its market share dropped from 10 per cent to 9.2 per cent.
In contrast, Morrisons has strengthened its case for buying Safeway by reporting further growth in its most recent trading statement issued in May. Like-for-like sales were up 8.4 per cent in the first 14 weeks of the financial year, outperforming the rest of the industry, and showing, Morrisons claims, that it has the right business model to help turn Safeway around.
The FT suggests that all these factors are likely to result in Morrisons revising its bid for Safeway if given the all clear by the DTI to around £2.7 billion. While the other retail bidders are likely to be prevented from proceeding by the DTI, a fifth bidder, retail entrepreneur Philip Green, could still make an offer for the chain, although it is unlikely to top that of Morrisons.