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Wal-Mart joins battle for Safeway
LONDON, England (CNN) -- Wal-Mart Stores, the world's biggest retailer, said on Tuesday it was considering making a bid for Safeway, the UK's fourth biggest supermarket group. Wal-Mart, which owns the UK's third largest food chain Asda, did not release details of its offer except to say it would be on an all-cash basis. The group said in a statement it would make a submission to the UK's Office of Fair Trading to seek clearance for a possible bid. "We need to have discussions with the competition authorities first before we can confirm what price we're willing to pay," Asda Chief Executive Tony De Nunzio told Reuters. Wal-Mart's announcement, which had been widely expected, opens a three-way bidding war for the 479-store Safeway chain. On Monday, J. Sainsbury, the UK's No. 2 operator after Tesco, said it might offer £3.16 billion ($5.1 billion) in cash and shares for Safeway. Last week, the fifth largest UK chain William Morrison announced a £2.7 billion ($4.35 billion) all-cash offer for Safeway. Safeway's board has agreed to the Morrison offer. "Getting stores in parts of the country where we're under represented means we can meet the pent-up demand of people who want our everyday low prices -- 12 percent lower than average supermarket," Nunzio said in a statement. Sainsbury's cash and stock offer, based on the closing price of Safeway on Friday, values the shares at more than 300 pence each. When Safeway's debt of £1.3 billion is included, the deal could be worth about £4.5 billion. "Over the past year, we have looked at the possibility of combining with Safeway in order to offer more customers greater choice and a superior food proposition throughout the United Kingdom," Sainsbury Chief Executive Peter Davis said in a statement on Monday. "Safeway's recent decision to relinquish its independence offers us a unique opportunity to acquire a large number of stores, which would enhance our strategic transformation." Sainsbury said its purchase would result in a cost saving for both groups of £300 million over a three-year period. It said it might have to close 90 stores and cut 1,700 jobs. "Wal-Mart has the balance sheet to pay [all] cash and that will be seen as the most attractive offer," Ashley Willing, a fund manager at Gertmore Investment Management, told Reuters. Shares in Safeway (SFW) were down 3.2 percent to 293.75 pence in midday London trading on Tuesday.
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