A newspaper report that Wal-Mart’s UK subsidiary ASDA is plotting a £2.8bn (US$4.4bn) takeover of struggling sector rival Safeway prompted the latter’s shares to open 5% higher this morning [Friday].
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The Daily Mail reported, through unnamed sources, that ASDA has approached the regulatory Office of Fair Trading (OFT) to establish whether it could get the green light for a buyout of the UK’s fourth-largest supermarket group.
ASDA currently ranks as the third largest grocer in the UK, behind Tesco and Sainsbury. If the buyout went ahead, however, it would directly challenge Tesco in size, with a 25% market share.
Industry analysts insisted that the deal was unlikely, however. One is quoted by Reuters as saying: “I’m sure Safeway would love to be put out of their misery and in an ideal world ASDA would love to take them over but I’m also sure the government wouldn’t allow it.
“ASDA is the best performing supermarket in the UK, it hasn’t a chance of arguing that it needs to buy Safeway to be able to compete with Tesco.”
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By GlobalDataSafeway, which embarked on a 100-store overhaul this year in a bid to boost sales, lacks the financial weight to compete with the likes of Tesco or ASDA , and has long been seen as a takeover target. The grocer’s shares are the worst performing amongst the major players, losing 33% in the last six months.
