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Monday, 23 September, 2002, 11:20 GMT 12:20 UK
Supermarkets giants 'mull Safeway bid'
Safeway supermarket
Safeway has long been the subject of takeover rumours
Speculation is growing that supermarket giant Safeway is being eyed up by rivals for takeover.

Analysts have said that takeover rumours, which have circled the City for much of the year, are gaining in credibility.

The company itself would not comment on the latest suggestion that the Asda chain, owned by US group Wal-Mart, was preparing to launch a bid in conjunction with J Sainsbury.

Analysts say a buy-out of Safeway makes sense, but that merger with one of the other UK supermarket giants would raise fears among trade watchdogs of monopoly situations.

Up for grabs

Safeway is the UK's fourth largest supermarket chain and the market leader in Scotland.

The group appointed new chief executive Carlos Criado-Perez in 1999 and embarked on a large-scale recovery programme, aimed at winning back shoppers.


Safeway is up for sale and would be open to a potential deal

City analyst

This included refurbishing stores, creating a new hypermarket format, and adding new services such as take-away food, dry cleaners and photo developing.

While this initially boosted sales, analysts say the recovery has now begun to slow and is proving expensive.

Ian McDonald, retail analyst at Numis Securities, told BBC News Online that the group had "done a decent job in turning itself around", but that it was "still struggling to carve itself a niche in the market".

Just talk?

The slowdown in Safeway's growth has prompted suggestions that it would in fact welcome a bid.

One analyst told BBC News Online: "Safeway is up for sale and would be open to a potential deal."

The main difficulty is the Competition Commission, which is keen to avoid a monopoly situation in any particular market and could make it difficult for Asda to gain too much market share.

Hence the most recent suggestion that Asda would split the Safeway portfolio with Sainsbury.

Supermarket split

Asda has a strong presence in the north of the UK but is keen to spread in the south, while the reverse is true for Sainsbury.

Mr McDonald said: "We do know that Wal-Mart are looking", and said the US group had already consulted the competition authorities.

"The important thing would be to find a home for stores where they overlap," he said.

But he added that there would be plenty of "opportunistically interested" buyers for stores which the Competition Commission ruled must be sold.

See also:

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