London investors were said to be disappointed by news that the U.K.'s Department of Trade and Industry ruled out three of four bids for U.K. grocer Safeway PLC because they "may all be expected to operate against the public interest." (Safeway PLC is not related to the U.S. chain that trades on the NYSE.)
The news also comes as a disappointment to Wal-Mart (NYSE:WMT), which had hoped to buy Safeway for its Asda chain. (Perhaps interestingly, Safeway CEO Carlos Criado-Perez was once COO of Wal-Mart's international division.)
The words quoted above were delivered in a detailed missive (which taught me a new word: fascia) from Trade and Industry Secretary Patricia Hewitt, who said William Morrison Supermarkets' bid for Safeway could proceed, but only after a very specific set of store divestments meant to help allay concerns about reduced competition and increased prices.
It's perhaps understandable, however, that U.K. investors would be disappointed because the ruling removed competitors from the bidding process -- even though Morrison, a well-regarded company, was probably the preferred bidder anyway. (Sainsbury and Tesco joined Asda to try to stop the merger of the U.K.'s fourth- and fifth-largest grocery chains.)
This is the kind of news Wal-Mart has long grown accustomed to since it began expanding aggressively overseas in order to juice its growth. Particularly in Europe, it has faced concerns not only to do with foreign investment but with the impact a company with Wal-Mart's scale will have on local competition.
Each time, it must contend with local regulators and their unique concerns and methods -- not to mention a frequent upswing in merger activity in markets it's known to be targeting. France's Carrefour, the world's No. 2 retailer, was created partly in response to Wal-Mart when the former purchased Promodes in 2000, creating another acquisitive global retail giant. (Wal-Mart still has no foothold in France or, for that matter, Italy, two choice markets in Western Europe.)
The U.K. grocery scene is dominated by the players discussed in this story and the competition is fierce. The challenges facing Wal-Mart there are evident: Since acquiring Asda, the company has added relatively few stores -- only one in 1999, three in 2000, six in 2001, and 10 in 2002. The acquisition of Safeway would have provided a nice pop.
You can reach Dave Marino-Nachison at [email protected].
