Safeway bid battle hots up

The bids read like a Who's Who of retailing

The bid battle for control of the Safeway supermarket chain has continued to gather momentum as leading UK retail entrepreneurs join the long list of suitors.

The usual suspects Philip Green, Allan Leighton and Archie Norman are now all rumoured to be entering the fray and expected to make their intentions known this week.

Mr Green, the billionaire owner of High Street giants Arcadia and BHS, is expected to place a cash bid of over £3bn for the chain on Monday.

"I think the City would look at this pair...as a pretty effective combination

Jeff Randall, BBC Business editor

Reports suggest he will enlist the help of Allan Leighton, former Asda boss and now chairman of Royal Mail, who is also chairman of BHS.

The Safeway skirmish was sparked by an agreed offer from the relatively small UK retailer William Morrison on 9 January.

Since then, rivals J Sainsbury and Asda's US parent Wal-Mart have expressed their interest along with the US venture capital firm Kohlberg Kravis Roberts (KKR).

Trump cards

Only Morrisons has so far made an official offer for Safeway, but its bold move has created one of the biggest retail furores in the food retail sector.

Morrisons started the bid battle

The Observer newspaper reported on Sunday that US leader Wal-Mart would offer as much as £4bn or 400p per share to get its hands on the group and trump any rival bids.

Morrisons' offer is based on shares but the bid value has fallen from £2.9bn to £2.5bn in the past week after its shares were knocked by the news.

Sainsbury's is expected to make a formal offer this week, while advisors to KKR told BBC News Online that the buy-out firm would probably wait until the Competition Commission has blocked one or more of the offers before moving in.

Competitive issue

Indeed the competition issue is a very real threat to many players in the bid war, as a merger between any two supermarkets could be blocked as being uncompetitive for shoppers.

SUPERMARKET SWEEP

9 Jan Morrisons offer

13 Jan Sainsbury's confirms interest

14 Jan Wal-Mart is 'interested'

17 Jan KKR confirms interest

Click here for more on the Safeway bid battle

Morrisons, the UK's fourth largest supermarket group, believes its relatively small size will allow it to avoid this worry.

But both Wal-Mart's Asda and Sainbury's, the UK's number three and number two supermarket chains respectively, could face stiff opposition.

A spokesman for CSFB, the bank advising KKR on its potential bid, told BBC News Online:

"If their bids are referred to the Competition Commission there will be uncertainties.

"This is probably when KKR will step in,"

KKR has a long history of taking over underperforming groups and spending between five and seven years making them more efficient, before selling them on.

"The City lost faith in Safeway," the spokesman told BBC News Online.

"KKR probably can't pay as much, but would avoid the regulatory issues."

Retail characters

But the bid saga is of interest as much for the characters behind the 'expressions of interest' as the bids themselves, reading rather like a 'Who's Who' of retailing.

BBC Business Editor Jeff Randall said competition for the take over had reached extraordinary proportions.

The flamboyant Philip Green already owns a sizeable chunk of the High Street following his £850m cash takeover last autumn of Arcadia, owner of the Top Shop, Burton and Miss Selfridge fashion chains.

BHS chairman Allan Leighton has food retail experience

He also owns the department store group BHS. Adding Safeway to the pile would give him a portfolio of over 3,000 stores with combined sales of about £12bn.

Mr Randall said: "If Mr Green were to buy Safeway it would put him into a completely new league.

"The problem is that up until now he has had no experience of food retail."

However, the food retail experience of BHS board member Allan Leighton would strengthen any bid.

Mr Leighton is a former chief executive of Asda, who left the supermarket giant to join Royal Mail.

Jeff Randall added: "I think the City would look at this pair - the financial firepower of Mr Green and the food retail experience of Mr Leighton - as a pretty effective combination."

The Sunday Times newspaper also suggested Stuart Rose, who sold Arcadia to Mr Green, is a likely candidate to run Safeway if the bid succeeds.

Mr Norman used to be chairman of Asda

Mr Rose used to be responsible for the food division of Marks & Spencer.

Meanwhile, Archie Norman - the former Asda chairman and Conservative MP - is rumoured to be advising KKR on its offer.

Mr Norman has played down the suggestions, but reports suggest he will act as a third party advisor to the bid plan.