Wal-Mart's Safeway battle plan

SUPERMARKETS giant Wal-Mart has drawn up a battle plan to help it decide when to launch a takeover bid for Safeway, the Daily Mail has revealed. The American retailer, which already owns Asda, has spent thousands of pounds on management consultants to assess the benefits of a takeover.

After detailed research from McKinsey and others, Wal-Mart now has a clear idea about how much it is prepared to pay for Safeway, currently worth £2.3bn. Safeway's share price has fallen 40% this year and is now low enough for Wal-Mart to pounce. But its main concerns are whether the regulators will let the deal go through.

As we reported last week, Wal-Mart has sounded out the Office of Fair Trading. It would probably have to sell most, if not all, of Safeway's Scottish stores to satisfy competition rules. Some in the north of England may have to go, too.

Wal-Mart failed several years ago to reach a friendly deal with Safeway, after news of the talks was leaked. This time, it reckons a hostile bid would be the best approach.

Safeway's chief executive, Carlos Criado-Perez, himself a former Wal-Mart executive, would be firmly opposed to a takeover. The Argentinian left Wal-Mart in April 1999 after he fell out with the management over strategy. If the US goliath does make a bid, Criado-Perez may try to reach an agreed deal with a rival such as Sainsbury's or Morrison.

Safeway, down 3p at 213p, has been losing market share in the cut-throat supermarket price wars. It is the fourth largest after Tesco, Sainsbury's and Asda, and is seen as the weakest. Criado-Perez has made great strides to improve the group's fortunes, but recovery is far from certain.

Most analysts think it is only a matter of time before Safeway is taken over, though regulatory hurdles remain the biggest sticking point.