Asda rules out hostile bid for Safeway as sales soar
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Your support makes all the difference.Asda ruled out a hostile bid for Safeway yesterday as it posted soaring profits and rising market share. But as Nigel Cope, City Correspondent, reports, Asda has not dismissed the possibility of an agreed pounds 9bn merger.
Asda's chief executive, Allan Leighton, moved to quell recent speculation that Asda might make a hostile move for Safeway after merger discussions between the two rivals collapsed in September. He said the regulatory difficulties that had scuppered the deal in the first place still remained. "And, anyway, hostile bids are not our style."
It is thought that the supermarket group, chaired by Archie Norman, is growing so fast that it may not need the deal. According to observers,Asda feels a hostile bid would be more likely to fall foul of the competition authorities than a merger.
The company is unwilling to risk the months of uncertainty that an investigation would require.
Mr Leighton was speaking after Asda's chairman, Archie Norman, had also poured cold water on the fevered bid speculation.
"A lot of the speculation has been fanciful, to say the least. Nothing has changed since September and apart from the occasional encounter at the odd Christmas party we have had no contact with Safeway whatsoever." But he added: "I'm not ruling anything out for an eternity. I'm a businessman."
He said Asda was not averse to acquisitions and had looked at buying the Welcome Break service stations earlier this year.
But he said the company did not need a deal to improve the business. It plans to double the number of Asda hypermarkets from 15 to 30 over the next two years while other stores will be extended.
The comments came as Asda reported a 19 per cent increase in first-half pre-exceptional profits to pounds 190m.
Asda's same store sales have increased by almost 9 per cent, well ahead of all its supermarket rivals, and its market share has increased from 10.6 per cent to 11.7 per cent. This is now well ahead of Safeway's share, which it reported last month as 7.8 per cent.
Analysts said the figures showed that Safeway was beginning to lose touch with Tesco, Sainsbury and Asda. "I think that in a few years' time we will be talking about the big three rather than the big four, whether Safeway gets taken over or not," one analyst said. Asda shares closed 7.5p higher at 178p.
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