Green says no to Safeway
it will not bid for the Safeway chain, leaving the way clear for
Morrisons to complete its takeover. The government's ruling that
only 53 Safeway stores could be sold off appears to be the main
reason for Green's withdrawal.
One of the last elements of uncertainty concerning Morrisons' takeover bid for Safeway has been removed today with the announcement that Trackdean Investments, the company owned by retail entrepreneur Philip Green, will not make an offer for the supermarket group.
As recently as last week, there was still speculation regarding a potential bid from Trackdean after Green confirmed that he had asked for the latest information about Safeway's financial performance.
But most observers had predicted that the businessman behind the BhS and Arcadia groups would not proceed with an offer for Safeway.
When it gave the green light to Morrisons' bid for Safeway, the UK Competition Commission's ruled that the other major supermarket operators (Sainsbury, Asda and Tesco) would only be allowed to bid for a total of 53 stores which Safeway had to sell as part of the takeover. This, analysts suggested, would effectively rule out any financial bidders, such as Green, as they would not have sufficient flexibility to sell off underperforming outlets.
Trackdean's statement confirming that it was withdrawing from the race to buy Safeway would seem to support this analysis. "Following a review of the possible implications of the announcement regarding the Safeway merger inquiries, Trackdean met with representatives of the OFT to clarify its understanding of the decision," the statement read.
While it did not confirm that this was in fact the case, the company clearly implies that the decision by the government, on the advice of the Competition Commission, to limit the number of possible store disposals to 53 was the principal reason for the decision to withdraw from the bidding.
However, Trackdean also said that it reserved the right to make an offer for Safeway in the event that a third party - i.e. someone other than Morrisons - came forward with a rival bid. Since this cannot be any of the top three players following the Competition Commission's ruling, and it is unlikely that any other domestic retailers would want to acquire the whole of the Safeway group (though several have been linked to the 53 stores already up for sale), the way now seems clear for Morrisons' offer to proceed as planned - barring an extremely unlikely offer from a foreign retail group.
The only remaining uncertainty is what price the Yorkshire-based retailer will offer for Safeway, with most observers suggesting it is unlikely to be as high as its initial £2.5 billion offer made in January last year.
