Morrisons to meet Safeway on new bid

Advisers to the supermarket groups Wm Morrison and Safeway are expected to meet in the next week to thrash out the terms of an agreed merger after Patricia Hewitt, the Secretary of State for Trade and Industry, yesterday set the bid clock ticking.

Morrisons has 21 days to renew its offer for Safeway following the announcement that Ms Hewitt has accepted undertakings from the Bradford-based group and its three rivals, Tesco, Asda and J Sainsbury, in relation to the acquisition of Safeway.

That gives Morrisons until 29 December to make a bid, although it is expected to announce its offer some time next week. Any later and many institutional shareholders would have left their desks for the festive break.

Morrisons' original all-share bid back in January valued Safeway at 277.5p a share or £2.8bn. Safeway is thought to be pressing for an extra 20p to 30p a share in cash, lifting the value of the deal to £3.2bn, in return for recommending a new offer.

Sir Ken Morrison, the retailer's chairman, has made it clear that he does not intend to pursue a hostile bid so he needs the support of the Safeway chairman, David Webster, and the rest of the board.

Safeway believes that Morrisons can afford to pay more because it will raise £600m from the sale of the 53 Safeway stores it must dispose of in return for regulatory approval of the deal.

Morrisons in turn argues that Safeway is worth less because the enforced disposals will reduce the scope for merger savings and because Safeway's trading performance has deteriorated since January.