Sainsbury, Wal-Mart Mull Separate Counterbids for Safeway

13 January 2003

Britain’s second largest supermarket chain J Sainsbury and Wal-Mart Stores of the USA have dropped all ideas of a joint bid for the UK’s fourth largest supermarket, Safeway (unconnected with the US chain of the same name).

Reacting to the agreed £2.5 billion ($4.03bn; €3.82bn) takeover bid by smaller UK rival William Morrison [WAMN: 10-Jan-03], Sainsbury held an emergency board meeting Sunday and announced it would make a formal statement Monday.

But Sainsbury chief executive Sir Peter Davies was unable to contain his enthusiasm: “This is a wonderful opportunity for us,” he BBC Radio 4's Today programme this morning. “We've been looking at it for over twelve months. We’ve had discussions in depth in the autumn and right up to Christmas with Safeway and we would very much like to do this.”

Sainsbury would value Safeway at about £3.2bn, its offer a mix of cash and shares. Morrison’s lower bid, funded solely by shares, has since fallen in value as its own share price declined on news of the deal.

Meantime, the world’s largest retailer Wal-Mart is also considering a solus all-cash offer for Safeway. But the US company already owns the UK’s number three supermarket group Asda and any bid could fall foul of the Competition Commission – as could that of Sainsbury.

Morrison, on the other hand is confident of gaining regulatory approval. Unlike Sainsbury and Asda, its extant store network overlaps with that of Safeway to minimal extent – and would result in the closure of only some ten stores.

Data sourced from: The Wall Street Journal Online and BBC Online (UK); additional content by WARC staff