Green joins bidding war for Safeway chain with all-cash offer

The retail entrepreneur Philip Green confirmed today that he is planning to enter the bidding war for Safeway, Britain's fourth-biggest supermarket chain.

The billionaire businessman has enlisted the help of Allan Leighton, the former chief executive of Asda who now chairs the Post Office, in his effort to win Safeway, widening the number of interested parties in the supermarket chain to five.

Any formal offer for the chain of 480 Safeway stores, if made, is expected to be all-cash and would also materialise "relatively quickly," sources said yesterday. Mr Green is working on the deal with the investment bank Merrill Lynch and is already thought to have lined up indicative financing for a bid.

In a statement to the City this morning, the retail entrepreneur said he had formally requested information from Safeway in order to size up a bid for the grocer.

Any takeover offer will be made by a new company controlled by Mr Green's family, but he added: "Deliberations are, however, at a very early stage and there can be no certainty that an offer will be forthcoming."

He will receive the same dossier of information sent out to rivals William Morrison, J Sainsbury and the US retail giant Wal-Mart, owner of Asda, as well as to the US leveraged buyout specialist Kohlberg Kravis Roberts.

So far, only William Morrison has tabled a formal bid for Safeway, proposing a £2.5bn agreed all-share offer, which has been submitted to the Office of Fair Trading for consideration. The other three contenders have yet to reveal their hands. J Sainsbury has expressed interest in making a £3.2bn cash-and-shares offer while Wal-Mart has said it was interested in making an all-cash bid.

At the end of last week, KKR confirmed it was also interested in putting together an offer but did not give away any details and said matters were at a "preliminary" stage. It was unclear yesterday, however, whether any KKR bid would be aided by Archie Norman, the Tory MP and former chairman of Asda, as reports circulated that he was not involved with the firm after all.

City analysts reckon other bidders for Safeway are also still likely to materialise and could include buyout firms such as Texas Pacific, CinVen and Permira.

Should any offer made by Mr Green for Safeway succeed, it will make him a formidable power on the high street. He already owns Bhs and, last year, snapped up Arcadia, owner of both Top Shop and Burton. And unlike potential bids from rivals J Sainsbury, Wal-Mart and William Morrison, an offer from Mr Green would be unlikely to face any regulatory hurdles.

Asda reckons it would have to dispose of around 60 of Safeway's 480 stores to gain approval from the competition authorities, 30 fewer than the 90 disposals Sainsbury's anticipates it would need to make but more than the 10 William Morrison believes would be necessary.

As part of his effort to bring Safeway under his ownership, Mr Green is also said to be considering enlisting the help of Stuart Rose, who used to run Arcadia. Last week, Mr Green announced he was planning to refinance Arcadia's flagship site at Oxford Circus in London – a move that would enable him to clear the first tranche of debt on the £850m deal to acquire the company.

He has already paid down £200m of the first £350m tranche of bank debt while another £140m will come from remortgaging the 214 Oxford Street site later this month. Mr Green bought Bhs in April 2000 for £200m and acquired Arcadia in October for £850m.