LONDON — Wal-Mart wants another piece of British retailing.
This story first appeared in the January 15, 2003 issue of WWD. Subscribe Today.
Confirming rampant speculation, the world’s largest company on Tuesday announced it is interested in making an all-cash offer for U.K. food retailer Safeway. Tony De Nuzio, president and chief executive of ASDA, the U.K.’s third largest retailer and part of the Wal-Mart empire, said in a statement his ambition is “getting stores in parts of the country where we’re underrepresented.”
Wal-Mart’s intention to bid follows an offer valued at about $4.1 billion by Wm Morrison Supermarkets PLC, and another pending bid by J. Sainsbury PLC that would value Safeway at about $5.04 billion. Figures are calculated at current exchange. The three companies are battling for market share — and real estate — in an intensely competitive market where obtaining planning permission for new stores is difficult.
Safeway, which has 480 stores and a strong presence in northern England and Scotland, currently has about 10 percent share of the U.K. food retail market and annual sales of about $15.04 billion. Safeway is Britain’s fourth-largest food retailer, but its stores generally are much smaller than those of Asda. In addition, unlike Asda, Safeway sells few nonfood products. Asda’s George line is one of Britain’s largest apparel brands and Wal-Mart is launching the collection in its stores worldwide, including in the U.S.
Asda’s bid for Safeway faces a big antitrust issue, however, both in the U.K. and in the European Union. The British government conducted an investigation into competition in food retailing 18 months ago, eventually ruling that the sector was, indeed, competitive. But the government has been monitoring the sector ever since and might be cautious about allowing Asda or Sainsbury’s, the U.K.’s second-largest food retailer, to grow to such an extent if either bought Safeway. Morrison is smaller than Safeway and might face less of an antitrust hurdle.