A Safeway bid solution for M&S

THE Competition Commission report on who should be allowed to bid for Safeway is still in Trade Secretary Patricia Hewitt's in-tray and the hints are that she will not release it until after the conference season when there is no possibility of flak from the floor of the Labour Party conference.

Early October is admittedly not that long to wait to learn what's what, but it is still long enough to be messed up if Defence Secretary Geoff Hoon is forced to resign over Iraq, and Hewitt is moved on in the subsequent reshuffle, as she is widely tipped to do.

But if that is one possible twist to the affair, there is another which, if not more interesting, is certainly of more consequence. Most people expect the bid battle to come down to an auction between Philip Green of Bhs and Ken Morrison of the Bradford-based chain that bears his name - aided and abetted as much as allowed by Asda or Sainsbury who would both like some of the pickings.

What is largely ignored, however, is the possibility of a completely new entrant to the battle and my favourite for this role is Marks & Spencer. It has a pressing need for out-of-town locations to supplement its High Street presence, being largely unrepresented in the new generation of retail parks.

Its traditional business could use these and so could its food business, either separately or together under one roof in the large units - and that is before it starts looking for space to roll out its new furniture format masterminded by Vittorio Radice, recently recruited from Selfridges.

I cannot remember when, if ever, Marks & Spencer made a takeover bid in Britain. But it is a different group now with a different culture and has been largely rehabilitated in the City by Luc Vandevelde and Roger Holmes. The shares have responded to the improved performance but there are now questions about what the group does for an encore. Safeway would be one answer.

RSA rights flop

THE advisers to Royal & Sun-Alliance who have put together a plan to raise £900m of new capital for the stricken insurance group seem to have forgotten a fundamental point about rescue rights issues - what is being rescued has to be worth saving.

In the case of RSA it is not clear that it is. That is why since the deal was announced a week or more ago the shares have done nothing but fall - helped on their way down, admittedly, by sustained opportunistic short-selling by hedge funds.

In two ways the rescue plan has made things considerably worse. First, the decision to use the funds in the main to boost the reserves of the American business so it could be sold brought home to everybody just how parlous the position there is. Second, the exposition of what was left underlined its hollowness and inadequacy.

To plan to build the future on personal lines and property in Britain and a few other countries sounds too much like a 'me too' insurer using old routes to market, outdated computer systems and a tired brand name to compete in a cyclical, commoditised market where all the advantages lie with the new internet players. Get the picture? Now try to justify pouring new money after bad!

The fact is that just because a company was big once does not mean it has a divine right to survive. Chronic managerial misjudgment have sunk Marconi and Cable & Wireless. Why should they not sink RSA? The odds on this issue being left with the underwriters grow bigger-every day that the share price keeps falling. RSA's place in the record books looks assured. It is heading for the biggest-ever rights issue flop.

Missing out

TALKING of insurance companies raising money ... seeing Aviva, the company behind the Norwich Union insurance brand, successfully raise more than £1bn in the debt markets this week to improve its capital ratios made me wonder whether such a move should have been necessary in the first place.

Ill-thought-through regulatory requirements forced it and other insurance companies to sell equities into falling markets for most of last year, making a bad bear market significantly worse. It also meant that when equity markets turned, as they did after the end of the Iraq war, Aviva and the other insurers were no longer holding a big enough slug of equities to reap the full benefit.

They missed out in large part on one of the biggest bounces in equities seen in any one quarter in the past 25 years and have had to tap the bond market.