The UK’s Trade and Industry Secretary, Patricia Hewitt, acting on the advice of the Office of Fair Trading, has ordered the Competition Commission to look into four of the prospective bidders for supermarket chain Safeway.
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The initial bid for Safeway, which came from William Morrison, is to be referred to the Commission, as are bids from Wal-Mart subsidiary Asda, Sainsbury’s and Tesco. All four bids have been referred on the grounds that the resulting mergers could be expected to result in a substantial lessening of competition. Entrepreneur Philip Green’s bid will not face the scrutiny of the Commission, as he has no other interests in food retail.
The Commission is due to complete its inquiries by 12 August.
Morrisons, which had been expected to avoid a referral to the Competition Commission, said it was very disappointed by the decision and was reviewing its options. The northern-based retailer, whose offer for Safeway will now automatically lapse, added that it had indicated to the OFT its willingness to undertake store divestments to address any local competition concerns.
In response to Hewitt’s announcement, Morrisons’ chairman, Sir Kenneth Morrison said: “The statement Wednesday is very disappointing as we believe our offer for Safeway would have enhanced competition and created a strong fourth national food retailer.”
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By GlobalDataTesco meanwhile, was unsurprised that its bid was referred to the Commission.
“I am not surprised by this decision,” said Tesco chief executive Terry Leahy in a statement. “We have always understood that competition policy limited consolidation of the four national players in our industry.”
Sir Peter Davis, Sainsbury’s group chief executive, said, “Naturally I am disappointed that the regulatory process is to be extended. However, we will cooperate fully with the Competition Commission and look forward to a satisfactory conclusion.”
Philip Green, the owner of BHS department stores and the Arcadia clothes group, is expected to make a move for Safeway, now he has been given the green light by the OFT, reported Reuters.
Asda, Sainsbury’s and Tesco are expected to make indicative offers to attempt to persuade Safeway shareholders not to accept an offer from Green before the competition probe has been completed.
When the Competition Commission has finished its assessment of the four bidders, the findings will be passed back to the Secretary of State, who will aim to announce her decision within 20 days on whether or not the bidders can proceed.
