Safeway (UK)
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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.
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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 has proceeded to rebrand the supermarkets under its own name and the convenience stores were initially branded as "Safeway Compact". The number of stores to be sold has been reduced by 1 to 52 after after Morrisons closed one Safeway store in Sunderland and the lease ended on another in Leeds city centre. John Lewis Partnership purchased 19 to be part of its Waitrose chain, while J Sainsbury plc purchased a further 14, and Tesco bought ten in October 2004. But Morrisons had got what it had wanted - Safeway's high presence in Scotland and the South of England (both places where the Morrisons brand was virtually unheard of) meant that the company could cover the whole of the UK. All it needed to do now was to slowly kill off Safeway's own-brand products and convert the remaining Safeway outlets to its own format. This process commenced shortly after the takeover. The best parts of the Safeway range, such as "The Best" range of high quality foods, have been adopted across the Morrisons chain.
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 now envisaged that full assimilation of the Safeway assets will take 3-4 years, as opposed to the 1 year that had been suggested. It emerged that Safeway had changed its accounting system just three weeks before the takeover and inflated its books by taking early bonus payments from suppliers, thus creating a deficit in excess of £130 million when the Morrisons accounting system was applied.
In late 2004 it was announced that the 119 smaller style 'Safeway Compact' stores were to be sold off to rival supermarket chain Somerfield. One of the main reasons was the Morrisons 'Market Street' store format, which is better suited to larger stores, while Somerfield is known more for smaller outlets.
In May 2005, Morrisons announced the termination of Safeway's joint venture convenience store/petrol station format with BP. Under the deal, the premises were split 50/50 between the two companies.
Currently three Safeway superstores are being converted to the Morrisons format each week and the brand is expected to disappear completely by the end of 2005 or soon after.
Related articles
External links
- Company website (http://www.safeway.co.uk)
- Hewitt Announces Reference Decisions on Safeway Bidders (http://www.gnn.gov.uk/gnn/national.nsf/TI/91B36B38D7E9639D80256CEE0055076A?opendocument), Department of Trade and Industry press release, 19 March 2003.
- Patricia Hewitt Accepts Competition Commission's Conclusions in Safeway Mergers Inquiries (http://www.gnn.gov.uk/gnn/national.nsf/TI/F4A1D1E46B9F00E880256DAD003934C3?opendocument), Department of Trade and Industry press release, 26 September 2003.
- Green leaves Safeway door open (http://www.guardian.co.uk/supermarkets/story/0,12784,1074828,00.html); Guardian Unlimited; 31 October 2003
- Morrisons in £3bn bid for Safeway (http://news.bbc.co.uk/1/hi/business/3319601.stm); BBC; 15 December 2003.
- Morrison to keep Safeway in Compact format (http://uk.news.yahoo.com/040308/325/enyq1.html); Reuters, 8 March 2004.
- John Lewis buys stores from grocer Morrison (http://www.reuters.co.uk/financeCompanyNewsArticle.jhtml?storyID=4655026); Reuters, 25 March 2004