Britain's fifth biggest grocer, William Morrison Supermarkets, has agreed a £2.9 billion sterling bid for rival Safeway, netting one of the sector's ripest takeover targets.
Safeway, the fourth biggest supermarket chain, has long been seen as vulnerable to takeover, losing market share to bigger rivals in a sector increasingly dominated by a few big players.
Morrisons, a family-run business which has been expanding from its heartlands in northern England, said Safeway shareholders would receive 1.32 new Morrisons shares for every Safeway share held. The deal is worth 277.5 pence per Safeway share - a 30.3% premium to the share's closing price yesterday.
The takeover follows a three-year turnaround drive at Safeway, designed to win back shoppers. The group earlier reported it had enjoyed its best ever Christmas period, with like-for-like sales up 4.2% - double market forecasts.
Morrisons shareholders will own some 53% of the enlarged group, which will have combined sales of £12.6 billion and a 16.1% share of the highly competitive UK grocery market.
No dilution of Morrisons earnings is expected as a result of the deal and management expects the takeover to enhance earnings significantly by the third year, when annual synergies are estimated to reach £250 million. The deal is expected to close by the end of June 2003.
