Storm clouds over Safeway plans

MORRISON Supermarkets faces an uphill climb to integrate Safeway. Rebranding the stores is the easy part, but chairman Sir Ken Morrison will have to crunch together warehouses, suppliers, IT systems and two different corporate cultures.

Ratings agency Fitch warned on Tuesday that Morrison faces fierce competition and 'substantial' execution risk from the takeover.

Asda and Tesco, which had regarded the Bradford-based supermarket as a regional chain, will already be plotting spoiler tactics.

Morrisons is a family firm, founded by Sir Ken's father William in 1899. Its values of good service and quality food at low prices have proved a winning formula so far. But some think Morrisons, which still counts its stock manually, will struggle if cut-throat rivals mount a price war.

Corporate governance concerns will rise to the fore if performance starts slipping. Sir Ken openly admits that he would like his son Will, 27, to take over.

His grown-up daughters, Eleanor and Andrea, also work in the business. The Morrison family own around 30%, though this will drop to about 18% after the Safeway deal.

Sir Ken, who has never seen the point of non-executive directors, promises to appoint two independents to the board after the merger. But they will have no chance of out-voting the nine executive directors, which will include Lawrence Christensen and Jack Sinclair from Safeway.

Many of the top Morrisons staff have been with the company since the 1970s. This is not a bad thing, but they have had no experience of dealing with major acquisitions.

Morrisons employs 25,000 staff, but Safeway has 85,000 - many of whom have had a dispiriting year. They may go elsewhere once the golden handcuffs are released.