Countdown begins for Safeway bid

- Last updated on GMT

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

Morrisons, the Bradford-based supermarket group, must make a bid
for the Safeway chain within 21 days after the UK government
yesterday accepted definitive undertakings from rival chains not to
bid for the company.

Trade and Industry Secretary Patricia Hewitt announced on Monday that she had accepted undertakings from Asda, Sainsbury and Tesco "not to acquire Safeway, or any part of Safeway whose acquisition may in the view of the OFT [Office of Fair Trading] give rise to the adverse effects specified in the Competition Commission (CC) report"​.

She also accepted an undertaking from Morrisons to sell stores in areas where local competition concerns would arise as a result of the acquisition.

The undertakings follow the Competition Commission report of 26 October, which found that bids from Asda, Tesco and Sainsbury would be against the public interest, while a bid from Morrisons should be allowed to proceed, provided 53 stores were sold.

"The Office of Fair Trading has advised me that they have obtained the undertakings which I have asked them to seek from Asda, Morrisons, Sainsbury and Tesco. I believe they satisfactorily address the concerns identified by the Competition Commission in its report, and have therefore decided to accept the undertakings offered,"​ said Hewitt.

The acceptance of these undertakings means that Morrisons is now free to make an offer for Safeway, and that Asda, Sainsbury and Tesco are can bid for some of the stores Morrisons must divest as a condition of buying Safeway. The three groups can also acquire other Safeway assets which may eventually be sold by Morrisons, but must first seek approval from the OFT.

Safeway said it welcomed Hewitt's decision, which "brings to a close the regulatory process which began almost a year ago"​.

For its part, Morrisons is expected to make its bid as early as next week - and well before the end of the three-week deadline - although speculation continues as to whether the bid will match the initial offer of £2.9 billion made back in January.

Some analysts suggest Morrisons will try to take advantage of the fact that it is now the sole bidder to lower the price, while others suggest that it will match - if not better - the offer in order to keep Safeway's current management happy as it begins the lengthy process of trying to absorb a company which is twice its size.

Related topics: Market Trends

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