Siân Harrington
Tesco boss Sir Terry Leahy was this week adamant his prospective bid for Safeway was a serious offer and not a spoiling tactic.
Leahy told The Grocer he understood the market's incredulity at the news Tesco had filed a submission to the Office of Fair Trading, but "the problem everyone has is that the competition laws are not clear cut. We have to make our own interpretation."
He admitted on first inspection Tesco did not think it could table a bid.
"We read the existing laws to mean reducing the number of national players from four to three would be difficult."
But defending the move, which would take Tesco's market share to 31%, he added: "In reality the competition authorities are being asked to consider this consolidation.
"We are potentially in the position of a major industry restructure and in this context it makes more sense that Tesco makes its case. No reasonable person would stand aside and allow the decision to be made for them."
Leahy said Tesco was an ideal fit for Safeway as its store portfolio could absorb all the latter's formats, from hypermarket down to forecourt store.
"Of course Safeway would be a good buy. All the stores are useful and we could run all the formats better. We have the most experienced team."
Tesco says a bid would create best investor value. It says it would reduce Safeway's prices, which it claims are 11.7% higher, and raise sales per sq ft. It says its weekly densities are £22.33 per sq ft compared to Safeway's £17.30.
Leahy would not be drawn on the value of a possible cash-and-shares bid nor the cost synergies he would expect to achieve but said: "We can afford the best and have done our sums."
Tesco's move was greeted with some derision. By taking a local perspective rather than one based on national market share, the company argues it could retain three-quarters of Safeway's estate.
"Not a chance," said Teather & Greenwood analyst Dave Stoddart, while another added: "Suppliers will go ballistic."
Most thought the move was a way of ensuring that Tesco had a place at the table and access to the same information as the other prospective players.
But Leahy argued the fact Tesco has been more successful than Sainsbury in recent years should not preclude it joining the battle.
As for Wal-Mart: "Tesco is big but Wal-Mart is five times bigger. It has been saying it can bring down prices because of its global buying power so it can't then say it is really not that big a player. You can't argue both ways."
Leahy added he was waiting with interest to see the potential private equity offers and was not surprised at the frenzy around Safeway.
"It is a very serious issue for the industry and authorities."
But with Marks & Spencer the latest to be tipped to enter the fray, the frenzy is in danger of turning into a farce, say analysts.
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Tesco boss Sir Terry Leahy was this week adamant his prospective bid for Safeway was a serious offer and not a spoiling tactic.
Leahy told The Grocer he understood the market's incredulity at the news Tesco had filed a submission to the Office of Fair Trading, but "the problem everyone has is that the competition laws are not clear cut. We have to make our own interpretation."
He admitted on first inspection Tesco did not think it could table a bid.
"We read the existing laws to mean reducing the number of national players from four to three would be difficult."
But defending the move, which would take Tesco's market share to 31%, he added: "In reality the competition authorities are being asked to consider this consolidation.
"We are potentially in the position of a major industry restructure and in this context it makes more sense that Tesco makes its case. No reasonable person would stand aside and allow the decision to be made for them."
Leahy said Tesco was an ideal fit for Safeway as its store portfolio could absorb all the latter's formats, from hypermarket down to forecourt store.
"Of course Safeway would be a good buy. All the stores are useful and we could run all the formats better. We have the most experienced team."
Tesco says a bid would create best investor value. It says it would reduce Safeway's prices, which it claims are 11.7% higher, and raise sales per sq ft. It says its weekly densities are £22.33 per sq ft compared to Safeway's £17.30.
Leahy would not be drawn on the value of a possible cash-and-shares bid nor the cost synergies he would expect to achieve but said: "We can afford the best and have done our sums."
Tesco's move was greeted with some derision. By taking a local perspective rather than one based on national market share, the company argues it could retain three-quarters of Safeway's estate.
"Not a chance," said Teather & Greenwood analyst Dave Stoddart, while another added: "Suppliers will go ballistic."
Most thought the move was a way of ensuring that Tesco had a place at the table and access to the same information as the other prospective players.
But Leahy argued the fact Tesco has been more successful than Sainsbury in recent years should not preclude it joining the battle.
As for Wal-Mart: "Tesco is big but Wal-Mart is five times bigger. It has been saying it can bring down prices because of its global buying power so it can't then say it is really not that big a player. You can't argue both ways."
Leahy added he was waiting with interest to see the potential private equity offers and was not surprised at the frenzy around Safeway.
"It is a very serious issue for the industry and authorities."
But with Marks & Spencer the latest to be tipped to enter the fray, the frenzy is in danger of turning into a farce, say analysts.
{{NEWS }}
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