Morrisons stunned the industry this week with a takeover bid for Safeway that would catapult it over Asda into third place in UK market share and leave it snapping at the heels of Sainsbury.
Morrisons executive chairman Sir Ken Morrison was being typically cautious after the bid was announced, warning: "This is not a done deal. We still have two significant hurdles to overcome approval from the OFT and to obtain the approval of the two sets of shareholders."
Morrison said he did not want to prejudge the outcome of the OFT's investigation, but added: "We have consulted with our lawyers and they believe we have a super chance. There is a great geographical fit between the two sets of stores that will require fewer than 10 disposals."
He refused to comment on the possibility of other players such as Sainsbury or Wal-Mart coming in with a higher bid, but joint md Bob Stott pointed out other bidders could run into trouble with the OFT. "If we get the go-ahead there are four strong players in the market. Any other combination is likely to bring it down to three."
Two Safeway directors, operations md Jack Sinclair and supply director Lawrence Christensen, will be invited to join the Morrisons board if the takeover goes ahead, with the other directors standing down. Morrison said Sinclair and Christensen represented two areas that were key to the success of the takeover, trading and logistics. He added: "We will be bringing a culture change to Safeway and it will be important to have an interface with the existing management."
He said there were considerable synergies which could be achieved by transferring all the head office functions from Safeway's Hayes HQ to Bradford, and about 1,200 jobs would be shed.
A new purpose-built HQ will be built on a 17-acre site in Bradford, due for completion in 2005.
Morrison declined to say which side approached the other, but revealed the two companies had started secret talks several weeks ago after a casual meeting at an industry function. "We got talking there and a few days later we called in our advisors and they got involved."
Although the offer document said the takeover could be completed by the end of June, Morrison was cautious: "It's business as usual. We are two companies who may or may not get together."
Minutes before Morrisons' offer for Safeway was transmitted to the Stock Exchange, Safeway announced its best-ever Christmas trading figures.
Like-for-like sales growth in the four weeks to January 4 was up 4.2% but sales in October and November were slow and sales in the 12 weeks to January 4 were up just 0.1% on a like-for-like basis, and 1.3% in total. Morrisons reported a 4. 3% like-for-like sales rise in the 13 weeks to January 5.
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