Safeway's hopes of a bidding war all but vanished yesterday after billionaire entrepreneur Philip Green withdrew from the £3bn race for the supermarket chain, clearing the way for Wm Morrison to launch an unopposed offer.
Mr Green, who owns the Arcadia high street empire and department store group Bhs, blamed "micro management" by the competition authorities for his decision.
The regulator warned last month that it would block any attempt to break up Safeway, leaving financial buyers such as Mr Green little room for manoeuvre. "It was too difficult. The issues are too complicated," Mr Green said, after meetings with the Office of Fair Trading confirmed that any attempt to sell on individual stores would prompt a further competition inquiry. "We can't make that type of investment without knowing what flexibility we might have," Mr Green added
Although Trackdean, Mr Green's family bidding vehicle, said it had "now decided not to proceed with an offer for Safeway", it reserved the right to re-enter the fray if another "firm" bid emerges. "In the event of something occurring that we hadn't thought about, we haven't locked ourselves out completely. But I wouldn't read too much into it," Mr Green said.
The City had anticipated Mr Green's exit on the grounds that he would be unable to extract sufficient cost savings to make a deal viable.
Safeway shares rose 4.75p to 294p, while Morrison climbed 3p to 224p. Tesco, J Sainsbury and the Wal-Mart-owned Asda were all barred from bidding by the Competition Commission, which wants to ensure the survival of four strong British supermarket groups.
Mr Green's withdrawal comes a day after Safeway surprised analysts by revealing underlying sales growth had resumed in its second quarter. Like-for-like sales rose 0.1 per cent in its first half - a better performance than Sainsbury's.
Mr Green said: "It [my decision] had nothing to do with the financial information at all. I just didn't want to end up in another inquiry." He did not want to be "held responsible" for further delaying the takeover process, which has dragged on since January.
Asked whether he had his eye on anything else on Britain's high street, Mr Green quipped: "Not this week."
Morrison is thought to be close to agreeing undertakings required by the competition authorities before it can launch an offer.
The other three supermarket groups are said to be hampering the process by refusing to sign away their future rights to acquire any part of Safeway, Morrison does not need to wait for their agreements before it can bid.
Analysts doubted whether the Morrison would raise its £2.9bn bid, which lapsed during the competition probe.
Paul Smiddy, at the stockbroker Baird, said any cash element - from Morrison's enforced disposal of 53 Safeway sites - would be "in replacement, not in addition" to the value of any deal.Reuse content