Morrison gets OK on Safeway bid

AS expected Sir Ken Morrison has been given the green light to go ahead with his bid for the Safeway supermarkets group.

Trade and Industry Secretary Patricia Hewitt today gave her verdict on the bidding battle following a Competition Commission investigation into the proposed offers from Morrison, Sainsbury's, Tesco and Wal-Mart owned Asda.

The Government has barred Sainsbury's, Tesco and Asda from bidding. Bhs owner Philip Green has also expressed his interest.

In a statement accompanying the decision, Hewitt said: 'I have considered carefully the Competition Commission's report and agree with their conclusions that an acquisition of Safeway by Asda, Sainsbury's or Tesco may be expected to operate against the public interest at both a local and national level.'

A number of adverse effects were identified by the Commission, including an increase in prices over time, stemming from a reduction in the number of national supermarket operators from four to three.

Hewitt added: 'I also agree with the Competition Commission's conclusions that the proposed acquisition of Safeway by Morrison's may be expected to operate against the public interest, but that store divestments where local competition concerns arise are sufficient to remedy adverse effects identified.'

Competition Commission Chairman Sir Derek Morris welcomed Hewitt's decision to accept, in full, the Commission's recommendations.

He said: 'I am pleased that our report and recommendations have been accepted in full. If Morrisons are successful with their bid for Safeway we would expect them to become a strong national player. They should exert a positive competitive effect on the grocery retail sector, and benefit shoppers.'

Morrison started the bidding battle in January when it launched an all-share offer, worth £3bn based on yesterday's closing prices. If it succeeds it will have to sell 53 stores.

David Buik, from City bookies Cantor Index, was offering odds of 11/8 in favour of Morrison being given the green light.

While he was unsurprised by the ruling, he believes the matter is far from closed. He said: 'It's still going to be an extremely painful process because they are going to have to get rid of 53 stores at least. Each one has to be individually dealt with by Morrison so it will be at least three months before this can be put to bed.'

Retail analyst Rhys Williams from Seymour Pierce was also unsurprised by the decision. He said: 'This has been our opinion since the start of this affair back in January.