Safeway drop recommended Morrisons offer

Supermarket target Safeway’s six-way takeover tussle took another twist today when it dropped its recommendation of an original offer from Morrisons.

The UK’s fourth largest supermarket chain instead told shareholders to “await developments” so it could review the other interest.

Despite the move, Safeway said it was still supportive of the Morrisons offer, which was tabled two weeks ago and valued the chain at £2.9bn (€4.37bn).

Since then there has been interest from Sainsbury’s, Asda owner Wal-Mart, Tesco, Bhs billionaire Philip Green and US buyout giant Kohlberg Kravis Roberts.

Reports today also suggested that Marks & Spencer had run the rule over Safeway, although M&S declined to comment on the speculation.

One of the key factors to be considered by the Safeway board and its advisers will be which of the proposed bids falls foul of regulatory concerns.

In today’s statement it said that it “remained confident” that a merger with Morrisons would avoid reference to the Competition Commission and noted that the Bradford-based retailer had so far made the only firm bid.

Safeway chairman David Webster said the company, which has 479 stores, remained “fully supportive of Morrisons pursuing its offer”.

However, he added: “In the light of the announcement by potential competing offerors, we are advising shareholders to await developments.”

Morrisons chairman Sir Ken Morrison acknowledged that the “extraordinary number” of bids had put Safeway in a difficult position.

He said: “They have kept us fully informed of their deliberations and we understand why they have made today’s statement.”