Safeway (UK)
Safeway is a chain of supermarkets and convenience stores in the UK, owned by Wm Morrison Supermarkets.
The chain was founded in 1962 by Safeway from the USA but was spun off and sold by Kohlberg Kravis Roberts, or KKR (which acquired the American parent company) in 1987 and listed on the London Stock Exchange as Safeway plc.
After some unprofitable years in the late 1990s it recovered with a program of store refurbishments. In 2002 it had the fourth largest supermarket sales in the UK. However after perceptions that it was growing more slowly than other large UK chains and with a low share price, various takeover rumours circulated during 2002.
On January 9, 2003, the much smaller Wm Morrison Supermarkets made an offer to purchase the chain, offering 1.32 new Morrison shares for each Safeway share, with the cooperation of the Safeway board. However this served only to start a stampede of other potential buyers: J Sainsbury plc, ASDA / Wal-Mart, KKR (which would have been the second involvement), Trackdean Investments Limited (controlled by Philip Green, owner of BHS and Arcadia) and Tesco all said they were considering making offers.
They were all asked to make submissions to the Office of Fair Trading (OFT) for approval under the Fair Trading Act 1973. On January 23 Safeway's board dropped its recommendation of the Morrisons offer. Kohlberg Kravis Roberts later dropped its proposal. On March 19 the remaining proposals except for Trackdean's (which was said to raise no competition issues) were referred to the Competition Commission by the Trade and Industry Secretary, Patricia Hewitt. The report of the Competition Commission was made public on September 26. A takeover of Safeway by Sainsbury, ASDA or Tesco was "expected to operate against the public interest, and should be
prohibited". However a takeover by Morrisons was held to be acceptable on the condition that 53 stores of the combined operation be sold, due to local competition issues. Patricia Hewitt accepted these recommendations.
Philip Green announced on 30 October that he was not proceeding with a takeover bid, on the basis that it was not clear whether approval could be obtained to sell off individual stores to other chains. On 15 December, Morrisons, the only remaining bidder, made a new offer of 1 Morrisons share plus 60 pence for each Safeway share, again with the cooperation of the Safeway board. On 11 February 2004 shareholders of both Wm Morrison and Safeway voted to approved the merger of the two companies, subject to the result of two High Court rulings later in the month.
On 8 March, 2004 the takeover by Morrisons was completed. Morrisons plans to rebrand the supermarkets under its own name and the convenience stores as "Safeway Compact". The number of stores to be sold has been reduced by 1 to 52. John Lewis Partnership purchased 19 to be part of its Waitrose chain, while J Sainsbury plc purchased a further 14.
In July 2004, Morrisons shocked the stock market with its first ever profits warning, largely caused by falling sales at Safeway stores. Three stores each week are currently being converted, however, with sales up more than 20% at those opening under the Morrisons fascia. It is also rumoured that smaller Safeway stores may be sold off or closed as they do not fit well with the Morrisons format. It is now envisaged that full assimilation of the Safeway assets will take 3-4 years, as opposed to the 1 year that had been suggested.
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