Tesco expansion fuelled by petrol stations bid

Tesco turned up the heat on its smallest rivals yesterday with an offer to acquire 30 former Safeway petrol stations from Wm Morrison.

The supermarket group intends to rebrand the freehold sites, which come with convenience stores attached, under its Tesco Express banner if it gets clearance from the competition authorities.

Analysts warned the deal risked sparking a full-blown competition inquiry given the growing clamour from lobby groups anxious about Tesco's dominant market share.

David Rae, the chief executive of the Association of Convenience Stores (ACS), which represents 32,000 small shopkeepers, said the deal typified the "creeping acquisition" strategy of the major supermarket groups. "The Office of Fair Trading needs to consider what this acquisition means in terms of consumer choice. Consumers require a breadth of outlets and fascias to choose from, as well as a choice of products," he said.

Although Tesco is almost twice the size of its nearest rival, Asda, with a 31.5 per cent share of the total grocery market, the OFT has waved through its previous conquests in the convenience-store sector. Yesterday, a spokeswoman for the OFT said the Government watchdog would review the deal before deciding whether to refer it to the Competition Commission.

Tesco, which controls 6.5 per cent of the top-up shopping market, sparked a land grab by major supermarket groups for convenience-store sites after it bought the T&S Stores group nearly three years ago. Tesco has about 550 Tesco Express outlets and 500 One Stop newsagents.

Independent retailers drew a glimmer of hope from the commission's recent decision to propose blocking the sale of 14 former Safeway stores to Somerfield. One of the sites was a convenience-store outlet. "The commission's report seemed to indicate a difference in approach between itself and the OFT," an ACS spokesman said.

Tesco said BP had pre-emption rights over 12 of the sites. It declined to reveal how much it had offered for the 30 sites, which have a gross asset valuation of £55.3m. A spokeswoman for Tesco said the group had looked closely at whether the deal gave it a dominant share of any local markets. "We think the deal is okay on that basis," she said.