Safeway countdown begins

The government is expected to announce later on Friday which of four potential bidders for the Safeway supermarket chain will be allowed to proceed.

The government's decision, based on an investigation by the competition authorities earlier this year, will take the race to buy Safeway, the UK's fourth-biggest supermarket chain, into its final phase.

An announcement is expected from the Department of Trade and Industry at about 1100 BST.

Trade and Industry Secretary Patricia Hewitt is widely expected to give the green light only to fifth-ranked William Morrison, blocking offers from its bigger rivals Tesco, Asda, and J Sainsbury on competition grounds.

All four would-be buyers, squeezed by intense competition and prevented from opening new supermarkets by strict planning regulations, are keen to get their hands on Safeway's 479-strong chain of stores.

Jockeying for position

Wal-Mart-owned Asda, which this summer leapfrogged Sainsbury to become Britain's second-biggest supermarket, stands to close the gap with top-ranked Tesco.

For Sainsbury, now languishing in third position, buying Safeway offers an opportunity to restore its market share and ensure that it does not become a takeover target itself.

Tesco, meanwhile, hopes that buying at least some Safeway stores will allow it to hold onto its position as the undisputed leader of the UK food retail sector.

Analysts say Morrison's offer raises the fewest competition issues because the firm has a smaller share of the grocery market than any of its rival bidders.

They add that a Morrison-Safeway combination would create a fourth force in the food retail sector capable of competing head-on with the 'Big Three' - Tesco, Asda and Sainsbury.

Unknown factors

However, there has been speculation that Asda, which held last-minute meetings with the competition authorities to argue its case, may be in with a chance.

Tesco and Sainsbury have also argued that they could get around the competition watchdog's objections through strategic store disposals.

And retail entrepreneur Philip Green, who was exempted from the competition enquiry because he does not have any interests in the grocery sector, may weigh in with a late offer.

Given the remaining uncertainties surrounding the takeover, Safeway may not be safely under new ownership in time for Christmas.