Morrisons’ claims that venture capitalists are circling Safeway’s small store estate have been greeted with surprise in the corporate finance community.
Speaking to journalists at the refurbished Safeway store in Milton Keynes on Tuesday, joint MD Bob Stott said he had received several expressions of interest from VCs.
However, any bidder without a logistics infrastructure or buying capability would face an enormous uphill struggle to add any value to the estate, said Kevin O’Sullivan, relationship director at Barclays retail and wholesale team. He said: “The problem is, many of these stores are in the no man’s land between convenience stores and superstores so customers will expect larger store prices. This would be impossible for someone entering the market from scratch.”
Various ex-Safeway executives had been looking at the estate, he added, but any non-trade buyer would be unable to drive any synergies. Moreover, the locations of the stores (dotted all over the country) made creating an efficient distribution network a massive hurdle.
One source close to the private equity community said he would be astonished if VCs were seriously looking at the portfolio. He added: “This is not a new entrants phase to the market. They would have to have a truly compelling proposition.”
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