Siân Harrington
Secretary of state for trade and industry Patricia Hewitt's decision to refer Morrisons' bid for Safeway to the Competition Commission this week was called "illogical" by City analysts and "surprising" by the industry.
Hewitt was acting on advice from the deputy director general of fair trading who said that within certain areas at local level there would be a loss of competition between Safeway and any of the four largest existing grocery operators.
Referring the Tesco, Sainsbury and Asda bids, Hewitt said there was significant prospect the mergers would result in a substantial lessening of competition. But she added: "There are reasonable grounds for believing there will be the same outcome in the case of Morrisons."
Morrisons said it was disappointed the OFT had found difficulty in identifying and addressing the local areas of overlap, and had indicated to the OFT its willingness to undertake store divestments where required.
"The statement is very disappointing as we believe our offer would have enhanced competition and created a strong fourth national food retailer," said Sir Ken Morrison.
The decision to refer all four trade bidders leaves the way clear for Philip Green's Trackdean Investments to make a bid. Green was unavailable to comment, but the City believes he may wait until Safeway's fourth quarter trading statement in April before deciding at what price to set a cash offer.
Responding to the decision, Tesco chief executive Sir Terry Leahy reaffirmed his view any restructuring of the industry from four players to three would serve consumers best if Tesco led that change (The Grocer, January 25, p4).
But the company expressed concern if the decision allowed a financial bidder to buy Safeway and sell off parts.
"There should be a reference to the Competition Commission if it seems likely to lead to a four into three consolidation by the back door," Tesco said.
But Credit Lyonnais Securities analyst Kien Tan said the news was good for Tesco as it meant that the options for Wal-Mart were now limited. "Wal-Mart will now have to concentrate on moving into non-food.
"It already has more non-food in smaller stores and is adding mezzanine floors."
He added that the decision "precludes the big three from playing in the Safeway game as the OFT said 85% of the one-stop shopping market was unacceptable. They won't be able to make an offer."
All trade bidders this week released statements saying they would now co-operate fully with the Competition Commission.
The Commission is due to report back to Hewitt by August 12.
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Secretary of state for trade and industry Patricia Hewitt's decision to refer Morrisons' bid for Safeway to the Competition Commission this week was called "illogical" by City analysts and "surprising" by the industry.
Hewitt was acting on advice from the deputy director general of fair trading who said that within certain areas at local level there would be a loss of competition between Safeway and any of the four largest existing grocery operators.
Referring the Tesco, Sainsbury and Asda bids, Hewitt said there was significant prospect the mergers would result in a substantial lessening of competition. But she added: "There are reasonable grounds for believing there will be the same outcome in the case of Morrisons."
Morrisons said it was disappointed the OFT had found difficulty in identifying and addressing the local areas of overlap, and had indicated to the OFT its willingness to undertake store divestments where required.
"The statement is very disappointing as we believe our offer would have enhanced competition and created a strong fourth national food retailer," said Sir Ken Morrison.
The decision to refer all four trade bidders leaves the way clear for Philip Green's Trackdean Investments to make a bid. Green was unavailable to comment, but the City believes he may wait until Safeway's fourth quarter trading statement in April before deciding at what price to set a cash offer.
Responding to the decision, Tesco chief executive Sir Terry Leahy reaffirmed his view any restructuring of the industry from four players to three would serve consumers best if Tesco led that change (The Grocer, January 25, p4).
But the company expressed concern if the decision allowed a financial bidder to buy Safeway and sell off parts.
"There should be a reference to the Competition Commission if it seems likely to lead to a four into three consolidation by the back door," Tesco said.
But Credit Lyonnais Securities analyst Kien Tan said the news was good for Tesco as it meant that the options for Wal-Mart were now limited. "Wal-Mart will now have to concentrate on moving into non-food.
"It already has more non-food in smaller stores and is adding mezzanine floors."
He added that the decision "precludes the big three from playing in the Safeway game as the OFT said 85% of the one-stop shopping market was unacceptable. They won't be able to make an offer."
All trade bidders this week released statements saying they would now co-operate fully with the Competition Commission.
The Commission is due to report back to Hewitt by August 12.
{{NEWS }}
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