Safeway sell-offs could raise £600m as buyers queue up

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The Independent Online

Safeway has received indicative offers for most of the stores it will have to sell as part of its expected takeover by rival grocer Wm Morrison.

The company yesterday said the offers for the 39 stores were "comfortably in excess" of the aggregate valuation of £543m by property adviser DTZ.

The 13 other stores it needs to unload, valued at £31m, had received "considerable interest". But their location and lack of suitors had made some sites less saleable.

In total the sell-offs, ordered by the Competition Commission as a condition of Morrison's takeover, are expected to fetch more than £600m.

Safeway said pre-tax profits rose £17.7m to £160.2m for the interim period to 11 October. Stripping out exceptional items, underlying profits fell 7 per cent to £173.2m.

The result was in line with analysts' expectations. The company said that "given the prolonged uncertainties" created by the takeover saga, "this is a pleasing outcome".

Morrison is the only bidder at present after the commission ruled out bids from Tesco, Asda and Sainsbury in September, and Bhs owner Philip Green pulled out of the running last month. The Bradford-based company is expected to make a firm offer for Safeway soon.

Analysts at Dresdner Kleinwort Wasserstein said the terms were likely to be similar to Morrison's all-share bid of £2.6bn in January.

Safeway said its ability to lift sales had been hampered by the "understandable reluctance" of some suppliers to support promotional programmes amid the uncertainty caused by the takeover.

A spokesman said there was something of the "Dunkirk spirit" within the company and that "people are amazingly resilient" given the uncertainties. "Staff turnover is actually down," he added.

But Safewayincurred £9m of exceptional costs for additional bonus and retention payments in the first half.

The company's shares fell 2.5p to 285.5p.