Sir Ken joins the big league

IT may sound a great deal of money, but for £3bn Morrisons is buying a bargain in Safeway. To understand you only have to consider the difficulty there is in crowded Britain of obtaining planning permission and food licences, and the reported £2bn that Asda/Wal-Mart was prepared to pay for 70 Safeway stores.

This does not mean it will be plain sailing for Sir Ken Morrison. He is entering new territory in southern Britain.

Morrison is taking over a Safeway chain that has been squeezed by the big players, and has struggled to grow despite the creative efforts of chief executive Carlos Criado-Perez. Morrison is also required to dilute the family shareholding and to normalise its governance.

All that said and done, Sir Ken will sleep easily in his bed at the Great Eastern Hotel in the City. With one bound he has taken the butter and egg company founded by his father William and thrust it into the big league.

This has all been made more possible because of the intervention of the competition authorities. Morrison has had an extraordinary stroke of luck.

The regulators chose to put the perceived interests of the consumer above those of the shareholders in Safeway and remove the chance of a healthy auction of the assets.

The sharp rise in Morrison's shares shows immediately who the real winners are.

Even if Morrison made a total hash of the integration, buyers would be queuing around the block not just for the superstore sites, but for the small shops that can be cash spinners, as M&S et al have demonstrated.

Game, set and match to government interference!

Hogg wash

SORTING out executive pay at GlaxoSmithKline has been a daunting exercise. The board, led by Sir Christopher Hogg, has felt pressure from governance zealots, newspaper headlines and their own top management.

At last year's AGM the institutions staged the most effective revolt against directors' pay in the history of the Footsie. Seven months later, after an interminable inquiry conducted by Deloittes, we now think we know the outcome.

Jean-Pierre Garnier and his fellow executives have bowed to the inevitable and, as first reported on these pages, agreed to move to 12-month contracts. In what is being portrayed as a sacrifice, they are forgoing compensation for the change. Hogg believes the board has met institutional demands by imposing strict performance requirements on the top team.

But before anyone starts crying into their soup, consider the potential rewards in the future. Garnier's pay entitlement, if he meets strict performance criteria, is £5.7m. This is close to what he earned last year (if options and free shares are included).

The board accepts it is a big headline number, but one that it believes has to be seen in the context of pay for industry chieftains in America.

What has escaped unscathed is Garnier's pension arrangements, which caused outrage because of a device that allowed JP to assume he was five years older than he really is. This has been dealt with by tripling his contributions - with the same outcome.

No one doubts that Garnier and GSK derive benefit from being in Philadelphia and being so active in the US lobbying and marketing sphere.

But does this justify GSK's executives being rewarded in a much more generous way than other British-owned enterprises?

What is it about GSK that sets it apart from other world-class British firms such as Vodafone and Unilever where pay - while generous - does not come spewing out of the cashpoint at the same rate of knots.

Saddam factor

THE Saddam rally turned out to be a lot less spectacular than the experts expected. This is largely because markets have come a long way since the conflict in Iraq began in April, sparking a rally that has yet to burn itself out. After all, the Dow passed 10,000 before Saddam crawled out of his rat hole.

Whether events in Iraq will be enough to start turning the dollar's decline around is the bigger question. Certainly, the last doubters about US growth are changing their minds, with Goldman Sachs - the most bearish of New York houses - forecasting 4% growth in the first half of 2004.

The build-up in growth is confirmed by the OECD, which reports that in the third quarter expansion in the industrial economies was 2.1% against 1.7%, with the US and Japan leading the way. In the end, this will be more critical for confidence than the Saddam factor.