UK supermarket chain Sainsbury’s is considering making an offer for rival Safeway, following Morrison’s surprise bid for the chain last week.

Sainsbury’s said it would make the offer in approximately equal amounts of cash and Sainsbury’s shares, which, based on Sainsbury’s closing share price on Friday 10 January 2003, would result in a value per Safeway share in excess of 300p (US$4.8).

Sainsbury’s, the UK’s number two supermarket chain behind Tesco, said it would satisfy the cash consideration from additional borrowings.

Sainsbury’s said it has long believed that a combination with Safeway would produce substantial synergies, create value for shareholders and offer customers an improved proposition. The company said it has identified at least £300m of cost savings arising from a combination of the businesses.

Sainsbury’s believes that it would need to dispose of around 90 stores in order to satisfy local competition issues and it plans to file a Merger Notice with the Office of Fair Trading as soon as possible.

Sir Peter Davis, chief executive of Sainsbury’s, said: “Over the past year we have looked at the possibility of combining with Safeway in order to offer more customers greater choice and a superior food proposition throughout the United Kingdom. Safeway’s recent decision to relinquish its independence offers us a unique opportunity to acquire a large number of stores, which would enhance our strategic transformation.”

Sainsbury’s also released its third quarter results for the 12 weeks to 4 January 2003, reporting total sales up 4% for the quarter. Like-for-like sales were up 2.8%, while like-for-like sales excluding petrol were up 1%.

The company said its transformation programme was on track, with 104 stores and 25 petrol stations upgraded with new IT systems.

Sainsbury’s also said that it had made continued progress on store development, with six new stores opened, eight stores refurbished and 13 stores extended during the quarter, bringing the year to date totals to 20 new stores, 20 extensions and 36 refurbishments.

Total sales at the company’s US operation, Shaw’s Supermarkets, were up 1.2%, while like-for-like sales increased 0.6%.

Davis said Sainsbury’s had experienced a solid Christmas trading period, set against a strong performance last year, and had made significant progress on the company’s business transformation programme.