The Department of Trade and Industry yesterday granted a surprise extension to allow the Competition Commission to complete its report into the future of Safeway amid speculation of a fresh 11th hour proposal from Asda, one of the five bidders vying to win control of Britain's fourth biggest supermarket group.
The Commission, which was widely expected to meet yesterday's deadline to deliver its report, requested an extra six days to allow it to consider a last-minute "matter" proposed at an unscheduled meeting last week. Industry sources said Asda, part of Wal-Mart, met with the Commission on Friday in a last-ditch attempt to salvage its prospects of mounting a £3bn-plus takeover of Safeway. It proposed fronting a break-up bid for the Hayes-based group, in which the bulk of Safeway's stores would be sold on to William Morrison with Asda retaining the rest, sources claimed.
The Commission declined to comment on the substance of the proposal although Sir Derek Morris, its chairman, confirmed that one of the parties had requested a "further meeting" last week. He added: "The Commission needed to assess the matters discussed and give the other main parties a chance to comment."
The Commission is thought to have been aware of Asda's proposal as early as last Thursday, giving it time to canvas opinion from the other three trade bidders before the meeting took place. Despite working throughout the weekend, the Commission said it had found it "impossible" to meet yesterday's deadline. "It is crucial that all views on relevant matters are described fully in the report," Sir Derek added, prompting competition experts to conclude that his ultimate aim was to avoid any possibility of Asda appealing his decision by calling for a judicial review.
"That's the last thing Sir Derek [who retires early next year] would want for his swansong," Alastair Gorrie, competition partner at Coudert Brothers, said. The Commission was humiliated in 2000 when the High Court overturned its decision to block the takeover of Bass Brewers by Interbrew of Belgium on a point of procedural irregularity.
Analysts said the Government's decision to extend the Commission's deadline to Monday suggested a bid battle could still be on the cards - although most ultimately expect only Morrison to be cleared to bid. Mark Hughes, at Numis Securities, said: "This suggests the Commission is open-minded about listening to the parties involved". Safeway shares edged 2p higher to 268p.
Asda confirmed it met with the Commission last Friday, but a spokesman insisted: "The meeting was all part of the normal process that we're in." It is not clear whether a three-day trip to the UK by the Wal-Mart chief executive Lee Scott last week was part of the group's last-minute push not to be excluded from the bidding frenzy. One source close to the bidders said Asda's break-up bid proposal was "typical" of Wal-Mart's "very aggressive style", adding: "It's the classic brash American thing, thinking they rule the world." In 1999, Wal-Mart smoothed the way for its £6.7bn takeover of Asda only after its top executives met with the prime minister.
Jacqui Smith, the DTI minister, said she had decided to grant the extension "to ensure that the views of all parties and the group regarding these mergers... are accurately reflected in the final report."
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