Trading delay sparks Safeway takeover rumours

Supermarket chain Safeway has delayed the release of its Christmas trading statement, fuelling speculation that the company's performance over the period was weak.

Safeway was originally planning to publish its Christmas sales figures on February 6 but has pushed back the announcement to the end of February, market sources said.

They said the move was likely to intensify speculation that a merger deal with Asda Group was moving closer.

"They did have a poor February last year, so if they expect February this year to be better, they could be delaying their trading statement to make like-for-like comparisons look better," one source said, adding that if this was Safeway's motivation, it supported the view that Christmas trading had been poor.

Rumours have circulated recently that a poor Christmas performance at Safeway would increase pressure on the company to strike a deal with Asda.

Safeway's share price was already sharply higher on renewed speculation about a possible deal with Asda in the wake of a discussion document on the issue by SG Securities analyst Mike Dennis.

In his note, Mr Dennis puts a value on Safeway of 420p if the merger with Asda goes ahead but judges the stock to be worth 300p if the deal is scuppered, according to dealers.

The analyst puts a value of 225p on Asda if the merger deal is struck but 175p if not, the dealers said. They added that Dennis has also put a buy recommendation on Asda but is advising clients to wait until Safeway confirms speculation about weak Christmas trading before buying the stock.

Safeway was not immediately available for comment.