LONDON, 27 September 2003 — Britain cleared family-run William Morrison Supermarkets Plc to buy rival Safeway Plc yesterday, blocking bids from larger chains and curbing the dominance of the top three food retailers.
The result, widely anticipated, stops industry leaders Tesco Plc, J Sainsbury and Wal-Mart’s Asda from swallowing the country’s fourth largest supermarket chain and could now create a more powerful rival for them. Trade and Industry Secretary Patricia Hewitt said the country’s top three chains would not be allowed to buy any part of Safeway other than 53 stores Morrison would have to divest in areas where its 123 stores overlapped with Safeway’s 480 shops.
“The proposed acquisitions of Safeway by Asda, Sainsbury’s and Tesco may all be expected to operate against the public interest, and should be prohibited,” Hewitt said, accepting the argument prices could rise if four national chains became three.
Morrison welcomed the news, saying it was in the best interests of customers, suppliers, shareholders and employees.
“The choice was always between cementing the market for the long term in the hands of the big three or letting the fourth player gain in strength,” the Consumers’ Association said.
The National Farmers Union was also pleased, having feared the impact on suppliers if the top three became more powerful.
Safeway shares fell 5.7 percent to 279-1/2p as the prospect of a bidding war faded though Safeway bonds rose in value. Morrison shares fell 2.5 percent to 214-1/2p on concerns the normally conservative family-run chain might struggle to integrate the larger Safeway business.
Tesco, which had never expected any of the top three to be allowed to bid, said it was not surprised by the decision. Its shares rose 1.1 percent to 237-1/2p on relief that its main competitors, particularly Asda, were prevented from bidding.
Sainsbury’s shares fell 1.3 percent to 274-1/2p. Debt rating agency Fitch said Sainsbury’s rating was the most likely to be under pressure if Morrison bought Safeway as the company is struggling to keep customers in the face of tough competition.
A combined Safeway-Morrison would have a market share of around 15.3 percent, in fourth place behind Sainsbury’s 16.1 percent share, which is falling.
