retail news in context, analysis with attitude

Tesco, the UK’s biggest supermarket retailer, said this morning that it may offer a serious bid for Safeway Plc, the number four food chain. Tesco CEO Sir Terry Leahy said that if Tesco makes a bid, it would be a cash-and-stock offer that would be “compelling” to Safeway shareholders. “Tesco wants a piece of the action,” he said, noting that his case for an acquisition is as good as anyone’s.

If Tesco’s involvement raises the specter of government investigation of the enormous amount of interest in Safeway, that may be exactly what the company wants, according to some analysts. The conventional wisdom is that government intervention is expected to make it more likely that Safeway won’t be sold to either of Tesco’s biggest competitors, Sainsbury and Wal-Mart.

Tesco already has about a 27 percent market share in the UK.

Leahy said Tesco could retain 75 percent of Safeway's 484 stores and avoid monopoly issues, which generally kick in when a company gets about a third of the market. Both Sainsbury and Wal-Mart, which owns the Asda Group, have said they could keep even more of the Safeway stores.
KC's View:
We’ll know this whole thing is going downhill when Prince Charles abdicates his position to put in a bid for Safeway, saying that while he used to think that the peerage and the arms of Camilla were the places to be, clearly it is supermarket management where the action is.