UK supermarket chain William Morrison has made a £2.9bn (US$4.7bn) bid for UK rival Safeway, ending months of takeover speculation.
Safeway, the UK’s fourth-largest supermarket chain, had been struggling to adequately compete with its larger rivals Asda, Tesco and Sainsbury. A merger with Morrison, the UK’s fifth-largest supermarket chain, would create a firm with sales of £12.6bn and a market share of 16.1%, challenging Wal-Mart subsidiary Asda for third place in the market.
Family-run Morrisons has its stronghold in the north of England, while Safeway is mainly focused in the South and in Scotland, making the two companies a good fit geographically.
In terms of operation, however, the two companies’ stores are quite different. While Morrisons’ 119 stores are mostly very large, Safeway operates many smaller town-centre stores. Morrisons’ executive chairman, the founder’s 71-year-old son Ken Morrison, has stuck to a low-cost, value-for-money approach for years. The firm does not enter into price wars, has no loyalty cards, no Internet presence, no overseas ambition and no debt.
The integration of the two head offices is likely to lead to around 1,000 non-store job cuts. Among those who are to resign if the merger goes ahead are Safeway CEO Carlos Criado-Perez and chairman David Webster. Criado-Perez joined Safeway in the late nineties and is widely credited with turning the under-performing company around.
The merger deal, which is expected to be completed in the second quarter, still requires formal acceptance by shareholders and approval by competition authorities.
Both companies also released Christmas trading figures. Morrisons posted same-store sales for the 13 weeks to 5 January up 4.3% including sales of petrol. Excluding petrol, the company said its same-store sales rose 3.7%.
Safeway said its same-store sales for the four weeks to 4 January rose 4.2%, representing its best ever Christmas. The company experienced slower sales in late October and November, but helped by strong demand for seasonal items and non-food items, the company achieved sales growth over the third quarter to 4 January of 0.1% on a like-for-like basis and 1.3% in total, reported Dow Jones News.