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.
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.”
The two UK supermarkets were forced to abandon merger talks five years ago, after details of the deal were leaked to the press.