Safeway merger decision due
The Government is expected to make its decision on who will be allowed to continue with a merger with the supermarket chain Safeway, later today.
Safeway’s 479 stores are currently at the centre of a bidding war from its 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, or ask the companies to sell off some of the stores to ensure that a competitive market remains for consumers.
It had also suggested that the bid from the Bradford-based, WM Morrison, could improve competition by creating a fourth national player to compete with the other three national companies.
Morrison’s bid is more 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.
The Secretary of State for Trade and Industry, Patricia Hewitt was expected to announce her decision a week ago but it was delayed after the Competition Commission delayed its report to her. Ms Hewitt has spent the last six weeks deciding on how, if at all, the merger will continue.
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 had been 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.
Ms Hewitt is widely expected to follow the Competition Commission’s assessment that allowing the Morrison bid to continue would be the best way forward.
Tesco and Wal-Mart Asda are likely to be refused permission to continue, as they are the two largest players in the market. Asda recently overtook Sainsbury to take second place in the UK supermarket sector.
Entrepreneur Philip Green has also shown an interest in taking over Safeway. Mr Green owns Arcadia, the high street retailing group. The commission decided to exempt his bid, since he does not have any other interest in the food retail market. His bid would not provide any competition issues that would concern the Government.
