Morrison to cut £2.9bn Safeway bid

A STEEP decline at supermarkets group Safeway is prompting rival Wm Morrison to trim its £2.9bn takeover offer.

Safeway's market share fell from 9.9% last year to 9.3% in the quarter to mid-August. Sainsbury has also fallen from 17.4% to 16.4%, behind Asda, says researcher Taylor Nelson Sofres.

Morrison's market share has risen from 5.8% to 6.1%. Leader Tesco is up from 26% to 27.2%.

Safeway admitted last month that it had been distracted by eight months of takeover uncertainty. Morrison believes its performance justifies paying less than its present offer of 1.32 shares for every Safeway share.

It will decide whether to revise its terms after the DTI rules on which of the four major supermarket chains is allowed to bid next month.

If Asda, Tesco, Sainsbury are ruled out, City analysts believe Morrison could cut its offer to 1.25 shares - which would now be worth 261p per Safeway share. Morrison would pay £2.7bn instead of £2.9bn.

Most expect Morrison to get the green light if it promises to sell some of Safeway's stores.

However, the group will still want to beat outside suitors such as retail tycoon Philip Green. It can afford to pay more because it can make bigger cost savings.