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EDITIONS
 Thursday, 23 January, 2003, 12:37 GMT
Safeway backs away from Morrisons
Safeway store
Safeway has a growing list of potential buyers
Safeway, the UK supermarket group, has thrown open the race to take it over, telling shareholders it no longer recommends they accept an offer from smaller rival Morrisons.

In the light of the announcements by potential competing offers, we are advising shareholders to await developments

David Webster, Safeway chairman
The announcement will come as a blow to Morrisons, which remains the only company to have made a firm bid for Safeway.

Its agreed offer announced two weeks ago by chairman Sir Ken Morrison has set the scene for an unprecedented bidding war for what is being described as the last big prize in British retailing.

With Sainsbury, Asda owner Wal-Mart, BHS tycoon Philip Green, US firm Kohlberg Kravis Roberts and now Tesco all expressing an interest, the Safeway board says it has been left with little choice but to open the field to allcomers.

'Difficult position'

In a statement, Safeway chairman David Webster said: "The board of Safeway continues to believe that a combination with Morrisons represents an opportunity to create a new dynamic force in UK food retailing and remains fully supportive of Morrisons pursuing its offer.

"However, in the light of the announcements by potential competing offers, we are advising shareholders to await developments."

Sir Ken Morrison said he still believed the two companies would create a "true strong fourth national food retailer".

This is now set to be one of those landmark takeover battles - a rare contest that will change forever one of our biggest industries

Declan Curry
BBC business presenter
But he added: "The Safeway board has been put in a difficult position by the extraordinary number of indicative bids that have emerged since we made our offer.

"They have kept us fully informed of their deliberations and we understand why they have made today's (Thursday) statement.

"They continue to fully support our position as the only bidder that can create and develop a strong fourth supermarket group and we look forward to their renewed formal recommendation once the circumstances are clarified."

Marks & Spencer

Earlier, Marks & Spencer refused to comment on speculation it could be the next retail giant to enter the battle for Safeway.

The bidders
Morrisons
Sainsbury
Philip Green
Kohlberg Kravis Roberts
Asda/Wal-Mart
Tesco
Marks & Spencer adviser Morgan Stanley has reportedly been looking at Safeway's network of stores to see how many could be converted into the M&S food format.

Although a full bid is possible, M&S is thought more likely to snap up any stores that need to be sold off to meet regulatory concerns if one of the existing bids succeeds.

Meanwhile, US private equity firm Texas Pacific, which last month gobbled up hamburger giant Burger King from Diageo, is also reported to be looking at Safeway.

The US company is reported to be considering teaming up with one of the bidders to mop up any leftover stores.

On Wednesday, the UK's biggest supermarket chain, Tesco, became the sixth business to confirm its interest in bidding for Safeway.

Tesco said its offer would be a mix of cash and shares, and would be "compelling" for Safeway shareholders.

Although Tesco already has a 27% share of the food retail market in the UK, it believes it could keep 75% of the Safeway portfolio and avoid any regulatory issues.

When the UK's competition watchdog last examined the state of the UK grocery market, it said that no one player should have a market share of more than 25%.

  WATCH/LISTEN
  ON THIS STORY
  Kevin Hawkins, Safeway director
"We still strongly believe in the logic of combining with Morrisons"

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22 Jan 03 | Business
22 Jan 03 | Business
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