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EDITIONS
 Tuesday, 14 January, 2003, 17:52 GMT
Wal-Mart confirms interest in Safeway
Asda Wal-Mart supercentre
Wal-Mart's financial muscle could prove decisive
The battle for the future ownership of Safeway has taken another turn, with the US retail giant Wal-Mart now admitting it is considering a bid.

We have the financial muscle to ensure our offer is attractive to Safeway shareholders

Tony De Nunzio, Asda president and chief executive
Wal-Mart said it was, through its UK business Asda, thinking of making an all-cash offer for Safeway .

On Monday, the UK's second largest supermarket chain, J Sainsbury, announced it was poised to make a cash and share offer for Safeway which would value the firm at about 3.2bn.

The bidding activity was triggered last week when Safeway announced that it had agreed to be taken over by the Yorkshire-based supermarket chain Morrisons.

The Morrisons deal was worth 2.9bn at the time of the announcement.

But the value of the bid has since decreased because Safeway would be bought with Morrisons shares, which have fallen in value since the deal was announced.

Safeway on Tuesday said it would make further announcements "as and when appropriate".

Clearing the regulators

"It's relatively clear the business [Safeway] is up for sale so the time is now right for us to make this announcement," said Asda president and chief executive Tony De Nunzio.

"We have the financial muscle to ensure our offer is attractive to Safeway shareholders."

Wal-Mart said it realised that it might have to sell some of its UK stores to get the deal cleared by regulators.

The firm said it would be making a submission to the Office of Fair Trading on Tuesday in order to seek such clearance.

On Monday, Sainsbury said it reckoned about 90 of its stores would have to be sold in order to get an offer cleared by the regulator.

Financial muscle

Wal-Mart's entry into the race for Safeway had been widely expected, and many analysts see it as favourite to win the bid battle.

"There's no detail in terms of what they are going to bid but we know they can outbid anybody anyway," said Iain McDonald, retail analyst at Numis Securities.

The fact that Wal-Mart is set to table an all-cash offer for Safeway - as opposed to Sainsbury's cash and share mix, and Morrisons share offer - is also seen as big advantage.

"They're going to pay cash, which makes them the favourites as far as I'm concerned," said David Buik at spread betters Cantor Index.

"They've got the flexibility to sell out bits and pieces of the portfolio if they're going to contravene regulatory requirements. Cash is king."

In the City, Safeway stock closed down 12.5p at 291p on Tuesday, with Sainsbury shares down 2.75p at 239p.

Morrison shares closed 0.75p lower at 184.25p.

In New York, Wal-Mart stock stood $0.15 down at $51.13 in morning trade.

  WATCH/LISTEN
  ON THIS STORY
  The BBC's Samantha Simmonds
"A fierce three-way battle for Safeway is now on"
  The BBC's Jeff Randall
"The Competition Commission is concerned there should be no monopoly"

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22 Oct 02 | Business
19 Sep 02 | Business
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