Business View: Morrisons loves the smell of Safeway in the morning. It smells of victory

Early on in Francis Ford Coppola's Vietnam war classic Apocalypse Now, Major Willard, played by Martin Sheen, complains that time off is bad for his battle- readiness. "Every day I am getting weaker and Charlie is getting stronger."

The battle for Safeway is like that. The supermarket group is cast in the role of Major Willard, stuck in limbo, waiting for something to happen. Wm Morrison, the only credible bidder left in the race, is like the Vietcong. Crouched, ready to pounce. And, as the latest market share figures from Taylor Nelson Sofres show, getting stronger all the time.

Talking to Morrisons after Friday's ruling by Patricia Hewitt - which blew Tesco, J Sainsbury and Wal-Mart/Asda, out of the water - another war quote came to mind, Sir Winston Churchill's post Battle of Britain address: "This is not the end, or even the beginning of the end. But it is, perhaps, the end of the beginning."

The battle for Safeway officially started on 9 January this year, when Morrisons revealed its agreed bid. After nearly nine months of to-ing and fro-ing, we are virtually back to square one with Morrisons the last man standing, as I predicted a week ago. Philip Green colourfully recanted on his comments made to me 10 days ago, no doubt on the strict advice of Bob Wigley at Merrill Lynch, though he didn't deny what he said, no doubt because there were at least two witnesses. But with his latest comment on his position - that he will read the document and then decide - he essentially rules himself out of the race. The Arcadia owner will only bid if Morrisons pulls out and Safeway can be broken up cheaply - which will not happen.

Wal-Mart must be miffed to be lumped in with Tesco and Sainsbury's as too big to bid for Safeway, especially as the ruling came on the same day as Business Week splashed "Is Wal-Mart too powerful?" across its front page. But it can take solace in being a victim of its own success, and its UK boss, Tony DeNunzio, is too smart to let his lawyers take on the Department of Trade and Industry over this.

This all leaves Morrisons is a powerful position. It now enters talks with the regulator over the 53 Safeway stores it must sell, and when that agreement is struck, it has another 21 days left in which to bid. And if a new offer is on the table before the first anniversary of the original one, I'll eat my hat.

Why the delay? The answer is that the longer Morrisons waits, the less it will expect to have to pay. Safeway managers are demoralised and the stores are underperforming, but this does not really bother Morrisons. It will rebrand, restock and revamp the chain and put new managers in. So day one of Morrisons' ownership will be like year zero at Safeway.

Meanwhile, good trading at Morrisons can only aid its share price. While Sir Ken and the team now realise they need about £500m of cash to sweeten the Safeway offer, they also realise they can get away with paying no more in total for the chain. Every pound extra of cash will be at least matched by a reduction in the number of shares included in the deal. And every few pence more on Morrisons' share price means fewer shares have to be put in the pot.

Charlie won the Vietnam war and Sir Ken's victory in the Safeway battle prom- ises to be every bit as crushing. It is what he does afterwards that is the issue now.

French without state aid

Assuming the DTI comes to its senses and does not pull the plug on the British Energy rescue because it misses Tuesday's deadline, the next hurdle will be getting approval from Brussels. There is a pretty good argument to say that elements of this rescue amount to illegal state aid. But this is as nothing compared to what is going on in France.

On Friday, the state-owned nuclear generator Areva paid the thick end of a billion euros for the transmission business of the virtually bankrupt engineer Alstom. This came less than two weeks after competition commissioner Mario Monti said he wasn't happy with what Paris was doing to aid Alstom's rescue.

The French government argues that Areva is getting a bargain. But Mr Monti should ask whether anyone had put hard cash on the table and why Areva had to have its arm twisted to make the bid.

But I have an inkling that Mr Monti will let this deal go through. Does this mean he is any more likely to approve the British Energy rescue? I should coco.

j.nisse@independent.co.uk

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