The world’s largest retailer, US-based Wal-Mart, is believed to be eyeing the UK’s fourth largest supermarket chain, Safeway, as a potential takeover target.
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Safeway’s fortunes have turned around in the last few years, and the group recently reported its eight consecutive quarter of out-performance, with Q2 like-for-like sales up 5.4%, compared with 5% last year.
Analysts believe that this is likely to make a £5bn-plus merger with Asda, Wal-Mart’s other UK grocery subsidiary, an appealing prospect.
One leading analyst argues that enthusiasm for a deal will not be universal however, and is quoted in the Daily Mail newspaper as saying: “It would make a great deal of sense from Asda’s point of view, but Safeway is not interested at all. Wal-Mart would have to pay a good price of about 21 times earnings or 500p-a-share.
“Competition authorities would also frown. A combined Asda/Safeway group would have about 25% of the grocery market, about the same as Tesco.”
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By GlobalDataThe two UK supermarkets were forced to abandon merger talks five years ago, after details of the deal were leaked to the press.
