Safeway champions Morrisons bid

Safeway champions Morrisons bid

Safeway: Up for grabs

Safeway, the UK supermarket at the centre of a bidding war, has told the BBC it still favours the original bidder Morrisons.

Bradford-based Morrisons sparked the bid talk in early January with a recommended offer for Safeway.

It is still the only group to have actually tabled a firm bid.

However, its approach prompted keen interest from virtually every other large UK food retailer, eager to gain a competitive advantage in an increasingly tough market.

Rivals Sainsbury's, Tesco and Wal-Mart - Asda's US parent - have all now come emerged as potential buyers, as have the entrepreneur Philip Green and US venture capital firm Kohlberg Kravis Roberts.

These groups indicated higher offers, forcing Safeway to withdraw its backing for Morrisons.

Upping the offer

The offer was originally valued at £2.9bn, but has since fallen to around £2.3bn because of the dwindling value of Morrisons shares.

"The premium that Morrisons originally offered has now disappeared, so the board of Safeway had to withdraw its recommendation," said Steve Hawkins, Safeway's head of communications.

Safeway meanwhile has enjoyed a 50% surge in its share value since the bid talk began.

"Our share prices have moved in opposite directions," he added.

Safeway's current share price of about 310p values the group at £3.3bn.

BHS-owner Philip Green and Sainsbury have both indicated that their offers would be worth around £3.2bn while Tesco claims its bid would be "compelling".

Original favourite

However, Mr Hawkins said Safeway still believed Morrisons provided the best fit.

"We still believe in the logic of that bid.

Morrisons wants to extend its northern-based portfolio

"We think it would be good for customers, good for competition and good for shareholders," he told BBC Radio 5 Live.

"That bid, if successful, would leave our existing business more or less untouched, which is good for customers."

The regulators

Retail tycoon Philip Green has said he plans to seek the go-ahead from regulators to make his bid.

The Office of Fair Trading (OFT) and the Competition Commission will have to approve any tie-up to make sure no group has too big a slice of the UK retail market, allowing it to control prices for both suppliers and shoppers.

The OFT is due to give its judgement on 18 March.

Safeway said it expected some, or all, bids to then be recommended to the competition watchdog.

All the while, the deadline for the Morrisons bid is ticking.

Shareholders originally had until 21 February to accept or reject the offer, but this deadline has been pushed back to April.