Sainsbury's and Asda are likely to have to dispose of more stores than first envisaged in order to have any chance of taking control of Safeway.
Morrisons made a recommended£2.9 billion offer for Safeway last week, but Sainsbury's and Wal-Mart-owned Asda - both likely to come under intense scrutiny from the competition authorities - are preparing higher counter-bids.
Sainsbury's has said it will off-load 90 stores, and Asda believes it could get away with ditching fewer. But Robert W Baird analyst Paul Smiddy said both retailers will need to up their estimates by 50 per cent.
Smiddy said: 'This is the last throw of the dice (in UK grocery). You would not bet against Asda. They'll take whatever they are allowed to and can manage big or small stores. They would bring prices down the most.'
If Asda/Wal-Mart seizes Safeway, it would be close to Tesco in market share terms at around 25 per cent. The same would be true of Sainsbury's.
Sir Ken Morrison has argued that a Morrisons win would strengthen competition by creating a strong fourth national food retailer. Morrisons would have a 16 per cent market share if it takes over Safeway.
Morrison said: 'We strongly believe that four national food retailers is better for competition than three.'
Asda chief executive Tony De Nunzio said: 'Getting stores in parts of the country where we're under-represented means we can meet pent-up demand.'
Sainsbury's chief executive Sir Peter Davis said: 'This is the last consolidation in the UK food retail sector.'
No comments yet