Sainsbury's buys 14 supermarkets from Morrisons

J Sainsbury, which recently issued a profit warning, is to expand its presence north of Birmingham after acquiring 14 supermarkets from Wm Morrison.

J Sainsbury, which recently issued a profit warning, is to expand its presence north of Birmingham after acquiring 14 supermarkets from Wm Morrison.

Justin King, the new chief executive, said the group was pouncing on the rare opportunity of increasing its UK estate. It did not reveal how much it paid for the stores, which are 30,000 sq ft on average, but said they had a net book value of £110m in September 2003.

"Such opportunities have become increasingly rare and we are delighted to secure these stores," Mr King said.

Sainsbury's raised the cash to buy the sites, which will cost up to £45m to convert, by selling its US supermarket business, Shaw's, in March. It had hoped to buy 20 stores from Morrisons, which was ordered to sell 52 sites after its £3bn purchase of Safeway to comply with competition requirements. It is also buying one store from Somerfield in Bridgnorth, Shropshire.

Mr King, who replaced Sir Peter Davis at the end of March, will make his City debut next week by unveiling a slight fall in annual profits. Fierce price competition from its rivals forced the group to spend more than it had bargained on lowering its prices during its final quarter, hitting its bottom line.

One of Mr King's first tasks will be to launch an attack on Sainsbury's prices, which are at least 7 per cent higher than Tesco's. But analysts at Merrill Lynch have estimated that it would cost at least £650m for Sainsbury's to reduce its prices by 5 per cent - more money than it is expected to make next year before it has paid tax.

Sainsbury's, which was overtaken by Asda as the country's second biggest food retailer last year, has seen its share of the supermarket sector slide to 15.5 per cent from 16.5 per cent a year ago, according to Taylor Nelson Sofres, the market research company.

Its parcel of stores, which are located mainly in the Midlands and the North of England, includes 13 old Safeway sites and one former Morrisons site - in Ripon, North Yorkshire. Morrisons, which has already sold 14 stores to Waitrose, opted to keep the existing Safeway store in Ripon. It has 24 stores left to sell.

Each site makeover will cost Sainsbury's between £1m and £3m.