Safeway Delists Morrison Bid in Favour of Deepest Pocket

24 January 2003

The battle to seize control of Safeway, Britain's fourth largest supermarket group, took a new turn Thursday when its board withdrew its recommendation to shareholders that they accept the £2.65 billion ($4.32bn; €4.01bn) offer from UK number five grocer William Morrison – whose bid triggered the present free-for-all.

As yet Morrison’s is the only bid on the table but there are at least five other keenly interested parties all of whom have formally declared their interest: J Sainsbury, Wal-Mart/Asda, US private investment group Kohlberg Kravis Roberts, retail tycoon Philip Green, and UK number one supermarketeer Tesco. Another US investment group, Texas Pacific, is said to be prowling the perimeter.

According to Safeway, it had no option but to pull its recommendation in view of the speculation-fuelled rocket in its share price - contrasting with the post-bid decline in Morrison’s stock.

There is much speculation as to why the battle for dowdy old Safeway has become the hottest game in town – not least because of the disparate motives of the players.

At first sight, the supermarket contingent’s objective is clear – to extend market share at the expense of rivals (or to block others from doing the same) – but only Morrison’s bid is likely to clear the competition hurdles.

As to the private equity brigade, it has noted (a) supermarketeers' aggressive market-share ambitions and (b) the competition barriers that will bar Tesco, Sainsbury or Asda from grabbing the whole animal, concluding that much moolah is to be made from a carve-up and redistribution of the body parts among the hungry grocers.

Data sourced from: Financial Times; additional content by WARC staff