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The Financial Times reports that Safeway Plc plans to complain to the UK’s Takeover Panel about the publicizing of an analyst’s report saying that it was too dependent on payments from suppliers for its revenues, and questioning its accounting practices.

Safeway is the prize in a five-way bidding war being conducted in the UK by Tesco, Sainsbury, Wal-Mart, William Morrison Supermarkets, and retailing magnate Philip Green. Because of the nature of information contained in the analyst’s report, Safeway said, the data only could have come from one of those five companies – all of which have been warned by officials not to leak information to outsiders.

Because of the nature of the analysis, it is possible that Safeway’s sales price could be driven down, something the retailer would like to avoid. Safeway has responded to the analyst’s report by saying that its business model is entirely sound and that it deals with and accounts for vendor payments exactly the same way every other retailer does.

In other Safeway-related news, UK fund managers who own stock in the company said they would block an attempt by Wal-Mart to acquire a larger stake in the company on the open market before regulators rule on its acquisition bid. The reason, apparently, is self-serving. These fund managers own stock in both Tesco and Safeway, and they see an acquisition of Safeway by Morrison as far less threatening to their positions in Tesco than a Wal-Mart buy.
KC's View:
Without judging the propriety of how Safeway accounts for vendor rebates and allowances, it seems fair to say that the “we account for them the same way everybody else does” may not be the soundest defense these days.