On Wednesday, January 8, we polled the best City minds to see whether they felt there would be a bid for Safeway this year. Of those quizzed, 70% said such a move would not happen in 2003. And 40% thought it unlikely in the foreseeable future. The research was part of a feature we were planning to run analysing the rumours that have been swirling around Safeway for months ­ and which have featured heavily in the columns of this magazine.
As part of that feature, we also asked whether Morrisons was a likely predator. The response was emphatic: No way, it has neither the inclination nor the infrastructure to take over Safeway.'
Soon after 7am on January 9, we were planning how to rewrite that feature and, like our contacts in the City, we were also re-assessing our views on Morrisons. You just don't expect surprises of this magnitude from a conservative retail company best known, in the words of Sir Ken, for sticking to its knitting. But while the news was shocking, the logic of the deal is hugely compelling. To succeed in the UK you need either to hold a defendable niche position or build up the sort of scale to compete in the mass market which as far as grocery products are concerned is competitive and highly deflationary.
Morrisons' takeover of Safeway will create a company with the right sort of scale and national profile. But it will also create an organisation of incredible complexity and, in the early days of its existence, two very distinct cultures ­ which is why so many in the City (yes, the same people who didn't think such a deal would happen in 2003) believe Morrisons is biting off more than it can chew.
Their scepticism is understandable. After all, history shows that most mergers, particularly those in retail, are doomed to failure. But the integration strategy outlined by Sir Ken this week gives me every reason to believe Morrisons may pull it off. Even the most sceptical pundit acknowledges that the Morrisons team is one of the best in the sector. That, in itself, is no guarantee of success. But having shown it does, in fact, have the inclination to make such an audacious bid, Morrisons has also signalled it is inclined to do all it can to make it work.