The UK subsidiary of US retail behemoth Wal-Mart, Asda, announced today that it was considering making a takeover bid for Safeway, the UK’s fourth-largest supermarket operator, currently in the sights of two of its rivals.
Although Asda has thus far been coy about the exact scope of its offer, the company stressed it would be an all-cash offer. Last week fifth-largest UK supermarket group Morrisons offered to buy Safeway for an all-share deal worth £2.9bn (US$4.65bn), although the value of this bid has inched down since Morrisons shares dipped. Meanwhile second-largest supermarket group Sainsbury’s yesterday [Monday] said it was poised to make a cash & share offer for Safeway which would value the firm at about £3.2bn.
Speaking to BBC Radio 4’s Today Programme today, an Asda spokesman said that an Asda takeover would result in fewer disposals than a takeover by Sainsbury’s, which predicted it would have to offload some 90 stores in order to gain regulatory approval from the Office of Fair Trading.
There is little doubt that Asda, largely via its US parent Wal-Mart, has the funds to walk away with Safeway. Asda president and CEO Tony De Nunzio commented bullishly: “We have the financial muscle to ensure our offer is attractive to Safeway shareholders.”
Nevertheless, having the deepest pockets does not necessarily make Asda the best fit with Safeway. Morrisons, whose stronghold is in the North of England, while Safeway operates primarily in the South of England and in Scotland, may well be given the green light to acquire Safeway without selling any stores.
Meanwhile, rumours have emerged of a potential break-up bid, possibly spearheaded by retail entrepreneur Allan Leighton, former CEO of Asda. US buyout group Kohlberg Kravis Roberts is also reported by Reuters to be preparing to enter the bidding contest, probably via a joint bid with Asda/Wal-Mart.
