Government blocks ‘big three’ bids for Safeway
The Government has decided to block bids by Asda, Sainsbury and Tesco for the supermarket chain Safeway.
The Trade and Industry Secretary, Patricia Hewitt said that the proposed mergers would not be in the public’s interest.
She said: ‘I have considered carefully the CC’s report and agree with their conclusions that an acquisition of Safeway by Asda, Sainsbury’s or Tesco may be expected to operate against the public interest at both a local and national level. A number of adverse effects were identified by the CC including an increase in prices over time, stemming from a reduction in the number of national supermarket operators from four to three.’
The bid from the Bradford-based, WM Morrison will be allowed to go ahead.
Safeway’s 479 stores were at the centre of a bidding war by rivals Tesco, Sainsbury, Wal-Mart owned Asda and WM Morrison. The Competition Commission warned in August that it could block the bids from Asda, Tesco and Sainsbury, and the Trade and Industry Secretary has followed its advice.
The blocked suitors hoped they would be asked to sell off some of the stores to ensure that a competitive market remains for consumers. However, Ms Hewitt claimed no ‘reasonable package of divestments’ would remedy the national competition concerns raised by the Competition Commission.
WM Morrison’s bid was always the most likely to be given the go ahead as the company is ranked fifth in the hierarchy of supermarkets and its stores are predominately in the north. Safeway stores are found predominately in the south of England and in Scotland. A merger would give Morrison’s a national presence.
Ms Hewitt announced that if the Morrison’s bid were to go ahead it would still have to sell off 53 stores in areas where their would be no local competition to the new company.
The entrepreneur, Philip Green has also been allowed to continue with a possible offer for the supermarket chain. The Competition Commission decided to exempt from its inquiry a bid by Mr Green, who owns Arcadia, the high street retailing group, since he does not have any other interest in the food retail market.
In a statement to the stock exchange Safeway said it will now consider the Government’s decision and announce any decisions in due course.
Competition Commission Chairman, Sir Derek Morris welcomed the acceptance of the Commission’s recommendations in full.
Sir Derek stated: ‘I am pleased that our report and recommendations have been accepted in full. If Morrison’s were successful with their bid for Safeway we would expect them to become a strong national player. They should exert a positive competitive effect on the grocery retail sector, and benefit shoppers.’
The competition regulator was primarily concerned that by allowing Safeway to be bought by either Tesco, Asda or Sainsbury the UK supermarket sector would be reduced from four to three at a national level.
Concerns were raised about the effect of the mergers on suppliers. Farmers complained that consolidation in the sector would lead to too much buyer power for the supermarkets.
