UK retailers Asda and Sainsbury have dismissed rumours that they are mulling a joint bid for sector rival Safeway as pure speculation.

A report in The Business newspaper yesterday [Sunday] claimed that Sainsbury, the UK's second-largest supermarket operator, and Wal-Mart subsidiary Asda, the third-largest grocer in the UK, have held talks about how they might carve up Safeway. The paper said Asda wanted to take Safeway's larger stores while Sainsbury would take the high-street portfolio.

Safeway has for some years been seen as a likely takeover target in the ever-consolidated grocery arena. While results have improved under the guidance of current CEO Carlos Criado-Perez, the group lacks the financial muscle to compete on price with Tesco or Asda, with which groups it most closely competes in terms of style and product offering.

However, Asda and Sainsbury today dismissed any suggestion they are planning a takeover bid, although they declined to comment in any detail. Analysts were also sceptical of the report in The Business, with Schroder Salomon Smith Barney's David McCarthy commenting that Asda and Sainsbury are in any case very unlikely bedfellows, given that Asda is stealing market share from Sainsbury.