Safeway has been fielding offers from rivals interested in tranches of its estate after the DTI’s relaxation of a blanket ban on bids for stores other than the 53 Morrisons would have to divest.
Safeway director of communications Kevin Hawkins declined to comment on reports that Asda was negotiating with Safeway over the sale of up to 70 large stores - ‘Safeway’s crown jewels’ - in a bid to scupper Morrisons’ plans to bid for the company.
However, a source close to the company said: “Secretary of State Patricia Hewitt’s clarification made it clear that it might be possible to sell more stores subject to OFT approval.”
Hawkins said indicative offers for the 53 stores Morrisons would have to divest if it bought Safeway were “north of £600m” - and considerably higher than the recent DTZ valuation.
By inviting offers for the stores - which Morrisons would have to sell if it bought the company - Safeway was simply providing all parties with an accurate picture of their worth, said Hawkins. Speaking as Safeway posted a sharp drop in first-half profit, he said volumes were “off a bit,” although value sales had increased, partly due to inflation and partly through a reduction in deep discounts (The Grocer, October 25, p5).
After restating its accounts according to the new FRS5 accounting rules, which ask companies to report sales net of any multi-buys and bogofs and report commission only for phone e-top up sales, like-for-like sales for the 28 weeks to October 11 were down 2.5%.
This reflected the high number of multibuys that Safeway had recently introduced at suppliers’ request, said Hawkins.
“In the past we have always reported gross sales because we think this gives a better picture of volumes going through the business,” he added.
Restated group sales were down 1.4% to £4.9bn, and pre-tax, pre-exceptional, profit was down 7.5% to £173m.