Morrison emerging as Safeway favourite
Sell off may deter big players
May 31 2003
Morrisons is emerging as the City favourite to win the battle to take over rival supermarket operator Safeway.
As analysts digest the full scope of the Competition Commission enquiry, which is taking a far wider look at the supermarket sector than originally envisaged, they are coming to the view that the bigger players, especially Tesco and Wal-Mart, are likely to decide that the maths doesn’t add up.
The number of stores each operator would have to sell off would make the acquisition costly. Asda owner Wal-Mart, with the deepest pockets, has been the City’s favourite so far.
JP Morgan analyst Matthias Reschke is latest City pundit to back Morrisons, which has a smaller market share than Safeway and the least catchment crossover. Reschke has advised investors to buy shares in the northern-based supermarket operator, based on a view that its current value is “underweight” given the likelihood of Morrisons acquiring Safeway,
The analyst sees Tesco, the UK market leader as having the least to fear from any shakeout in the sector, and Sainsbury’s as the most vulnerable.
Sainsbury’s chief executive Sir Peter Davis has already indicated that the company hopes to benefit from any store sell-offs following the commission’s decision, saying there will be “first, second, and third przies” up for grabs.
