Safeway moves into Ireland

Safeway, the food retailing group, is following its mainland rivals J Sainsbury and Tesco across the Irish Sea by teaming up with Tony O'Reilly's Fitzwilton group in an IRpounds 77m (pounds 74m) deal to establish 19 stores in Northern Ireland.

Safeway Stores (Ireland), the equally-owned joint venture, will buy nine of Fitzwilton's food stores trading under the Wellworth name, the leading chain in Northern Ireland, and lease another six while developing four outlets.

The move will catapult Safeway into number two position in the province behind Tesco, which has 34 stores following a deal to buy Associated British Foods' outlets earlier this year. Safeway plans to use the bridgehead established in the north to expand southwards.

Safeway said it had been working on the Irish plans for the past seven months. Teaming up with Wellworth, which had traded throughout the Troubles, meant Safeway would retain political balance, said Simon Laffin, finance director.

The joint venture, into which each party is putting pounds 10m of equity capital, will buy the nine stores for IRpounds 67.4m (pounds 61.8m) and spend around pounds 5m on each store to add petrol stations and general refurbishment. The resulting average cost of under pounds 11m a store compared with more than pounds 16m to build one on the mainland, Mr Laffin said.

The Irish group has sold the remaining 21 Wellworth stores to Musgrave, a private company, in an IRpounds 67m deal.