Sainsbury Considering Bid for Safeway Plc

LONDON - British supermarket giant Sainsbury PLC said Monday it was considering making an offer of more than 3 billion pounds ($4.8 billion) for Safeway PLC, raising the prospect of a bidding war for Britain's fourth largest grocery chain.

Analysts said Wal-Mart Stores also was likely to bid for Safeway.

The British chain was offered 2.9 billion pounds ($4.6 billion) last week in a bid from William Morrison Supermarkets PLC, a smaller player in the U.K food retail market.

Sainsbury said it intended to file a detailed merger proposal to competition authorities next week and would offer more than 3.16 billion pounds ($5.06 billion) in cash and stock, the Associated Press reports.

"This is a wonderful opportunity for Sainsbury's shareholders and Safeway shareholders, and we believe we can generate real value out of this," said chief executive Sir Peter Davis.

He said a deal with Safeway would generate cost benefits of at least 300 million pounds ($480 million) but could cost up to 1,700 jobs.

Any such deal would have to be approved by competition authorities. Sainsbury's said it believed it would need to sell off 90 of Safeway's 479 sites to "satisfy local competition issues."

Analysts said Wal-Mart -- which owns British supermarket chain ASDA -- was likely to make a bid, too.

"ASDA/Wal-Mart has not declared its hand at the moment, but I find any other outcome difficult to envisage," said Iain McDonald, a retail analyst at Numis

An ASDA spokesman said the company would not comment on market speculation.

The combined Morrison-Safeway business would have 598 stores and a market share of 16.1 percent -- the same as ASDA, Britain's third-biggest food chain. Morrison ranks fifth.

Sainsbury is Britain's second-largest supermarket chain with a 17.2 percent market share, behind leader Tesco PLC, with 25.8 percent.
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