CityBeat: Gallows humour at Safeway
Glynn Davis looks at the problems generated by the protracted takeover battle in the UK supermarket sector
March 27 2003
Now it seems we’ve got various suppliers concerned about committing to long-term contracts with Safeway as it finds itself the retail equivalent of a beached whale following the recent decision by the Competition Commission to refer all the trade buyers interested in buying the company.
This is the latest event to take the wind out of the company’s share price. And in the period between now and August when the results of the referral are published, via its trading statement in April, there seems little to stop the share price falling further.
Along with the issue of supplier concerns we have the only ‘cleared’ bidder, Philip Green, in no rush to even table a half-acceptable offer. Why bother, when he has no competition and can watch morale at Safeway fall at the same rate as its share price? It has come off from a 12-month high of 331p at the peak of the bidding frenzy to a current 257p.
Speaking to a variety of Safeway people over the last few weeks has involved listening to much gallows humour. But when people start jumping ship to join other retailers then those left behind will move into demoralised territory. This undoubtedly won’t take long to feed through to shoppers.
It’s a downward spiral that has not been helped one iota by the decision of the Competition Commission. It has been said in many publications already, but referring Morrisons places Safeway at the mercy of the shark-like Philip Green.
A beached whale versus a predator with Green’s track record is a scenario that Safeway management and staff can’t be enjoying. And neither should shareholders. I think I’d take the 257p and go shopping with the proceeds.
Glynn Davis was previously a fund manager in the City, and has since become a business journalist specialising in the retail sector. He regularly contributes to national newspapers and specialist trade publications. email Glynn@busicomm.fsnet.co.uk
