Safeway puts Morrisons on hold
Fall in share price devalues offer
January 23 2002
Safeway has decided to withdraw its recommendation of Morrison’s bid for its business.
With unprecedented interest from other potential bidders, as well as a fall in Morisson’s share price since the agreed offer was announced a two weeks ago, Safeway has decided to keep its options open.
The Safeway board said that in the light of declared potential bids from Sainsbury’s, Wal-Mart, KKR, Philip Green and Tesco, it “is not able at the present time to recommend Safeway shareholders to accept the offer by Morrisons.”
The Morrisons bid initially valued each Safeway share at 277.5p, a 30.3 per cent premium on the price the day before the announcment of the offer on January 9. The fall in Morrison’s share price and the rise in Safeway’s price in anticipation of a higher bid has seen the value of the offer fall to 241p a share compared to Safeway’s closing price yesterday of 321.5p.
Safeway chairman David Webster said: “The board of Safeway continues to believe that a combination with Morrisons represents an opportunity to create a new dynamic force in UK food retailing and remains fully supportive of Morrisons pursuing its offer. However, in the light of the announcements by potential competing offerors, we are advising shareholders to await developments.”
Responding to Safeway’s decision, Morrison’s chairman Sir Ken Morrison, said: “We strongly believe that Safeway and Morrisons together will create a true strong fourth national food retailer to the benefit of customers, suppliers, employees and shareholders alike.
“However, the Safeway board has been put in a difficult position by the extraordinary number of indicative bids that have emerged since we made our offer. They have kept us fully informed of their deliberations and we understand why they have made today’s statement. They continue to fully support our position as the only bidder that can create and develop a strong fourth supermarket group and we look forward to their renewed formal recommendation once the circumstances are clarified.”
