Green still interested in Safeway?
its bid to acquire Safeway. The retail entrepreneur this week asked
for updated financial information about Safeway, perhaps an
indication that he will still make an offer. But Morrisons still
has the upper hand.
Philip Green, the retail entrepreneur has been particularly quiet about a potential bid for the Safeway chain in the UK in recent weeks, but he has not given up on the idea.
According to a report in the Telegraph newspaper this week, he has asked for more information about the chain's finances this week, a clear indication that he has not yet decided to leave the way entirely clear for Morrisons, the Yorkshire-based supermarket group given the go-ahead by the government to acquire Safeway.
According to the report, Green said that his request for further information meant that "I'm looking at it [the Safeway deal]. I like to see the information. There's nothing wrong with that. Is there?"
But Green's request - which was mirrored by a similar one from Morrisons, according to the report - has come as a surprise to some observers.
When the government announced last month that it was giving the green light to Morrisons to bid for Safeway, it also said that the three other retail bidders (Tesco, Sainsbury and Asda) would only be allowed to bid for the 53 stores which Morrisons will have to sell to win final approval for the takeover.
This was taken as an indication that a bid from Green would not be possible, since the competition authorities were keen to limit the expansion of the larger retail groups through the piecemeal acquisition of a large number of Safeway stores.
The freedom to sell off outlets would almost certainly be a core part of Green's strategy for turning around Safeway if he was successful in bidding, and without the opportunity to sell them to the leading supermarket groups, this would be a far harder task.
The likelihood is that Morrisons will be the sole bidder for Safeway - the big question is not whether it will face a rival offer but rather how much the smaller chain will now offer to pay for Safeway. All the indications suggest that it is planning to significantly lower its initial offer of £2.9 billion in the light of worsening trading figures at Safeway since it was made. This is offset, however, by the lower number of stores to be revamped following the Competition Commission's decision that 53 stores (rather than 40 or so as originally thought) would have to be sold.
It has a strong hand, of course, with few alternatives remaining for Safeway's management if they reject a lower bid from Morrisons - none of the other major retailers will be allowed to bid, and other smaller players are in no position to. Financial bidders face the same problem as Green - the difficulty of selling off stores.
So Morrisons is almost certain to be successful in its bid - and most observers believe that it will also succeed in turning things around at Safeway. Green's intervention is still possible, but Safeway is likely to want to draw a line under this particular part of its recent history as quickly as possible - and that means accepting Morrisons' offer.
