Morrisons warns on reduced competition
Northern chain to pursue Safeway offer
January 22 2003
Supermarket chain Morrsions has vowed to push on with it agreed bid for Safeway in the face of ever-growing interest in the business.
Chairman Sir Ken Morrison warned that allowing Sainsbury’s, Asda, or latest contender Tesco to absorb Safeway would threaten consumer choice by reducing the number of major players form four to three.
Sir Ken said: “It does not surprise me that Tesco is joining Wal-Mart-Asda and Sainsbury in pursuit of Safeway. It further reinforces our view that the combination of Morrisons with Safeway will create a highly effective competitor for the big three national food retailers which they are all busy attempting to thwart.
“The combination of Safeway and Morrisons will create a fourth strong national food retailer. A takeover of Safeway by Tesco, Sainsbury or Asda would eliminate a competitor, concentrate their purchasing power still further, and could create an anti-competitive and unhealthy market place with less choice and potentially higher prices.
“A financial buyer of Safeway is likely to lead to a break up, either now or later, leaving just three big food retailers. The alternative of maintaining Safeway on its own will not provide customers, suppliers or investors with the benefits of scale that our merger will bring.”
Morrisons’ bid for Safeway is still thought to be the Government’s preferred choice, since the Northern based chain has little geographical clash with Safeway, which trades mainly in the South and Scotland. However, Tesco has thrown the contest open by effectively challenging the fairness of the competition rules which prevent it from bidding and would potentially allow a competitor to overtake it for the number one slot.
Morrisons countered Tesco’s estimate that it would only have about 30 per cent of the market if its were allowed to take over Safeway, saying that Tesco and Safeway together would have around a 44 per cent share of the key measure of one-stop food shopping – the main supermarket business.
Sir Ken said: “All the bidding interest in Safeway is so far hypothetical – the only offer actually on the table is from Morrisons and it is in the best interests of Safeway’s customers, suppliers, employees and shareholders. We have a deliverable offer which we will continue to pursue vigorously.”
