Wal-Mart, Sainsbury May Bid for Safeway Plc

U.S. retail giant Wal-Mart Stores Inc. and British grocer J. Sainsbury each are expected to bid for Safeway Plc in what could become a three-way battle for Britain’s fourth-largest supermarket chain, sources close to the situation said Sunday.

Sainsbury is poised to bid about $4.8 billion for rival Safeway after another British grocer, William Morrison Supermarkets, agreed to a $4.25-billion all-stock deal to acquire Safeway last week. (Britain’s Safeway is not associated with U.S. grocer chain Safeway Inc. of Pleasanton, Calif.)

Sources said U.S. retail giant Wal-Mart, owner of Asda, Britain’s third-largest supermarket chain, also has stepped up plans to make its own cash offer after it abandoned a proposed joint bid with Sainsbury.

Sainsbury and Wal-Mart “are working on their own offers rather than continuing to explore a joint bid,” one source close to the situation said.

Safeway told Reuters on Sunday that it had not received any fresh offers from other potential bidders and that it still stood by Morrison’s offer.

“We’ve recommended a bid from Morrison to our shareholders, and obviously we stand by that recommendation,” a spokesman for the firm said.

Sainsbury declined to comment on the speculation. Officials at Bentonville, Ark.-based Wal-Mart were not available for comment, and British subsidiary Asda declined to comment.

Sainsbury is planning to offer a mix of cash and shares and could make its offer in the coming week, sources said.

The firm is considering teaming up with private equity groups including U.S. firm Kohlberg Kravis Roberts & Co. that would help fund the deal, the sources said.

London newspapers reported Sunday that the Wal-Mart bid was likely to be for cash, possibly as high as $5.6 billion.

Though Morrison’s offer is unlikely to face serious regulatory hurdles, bids from Sainsbury and Wal-Mart almost certainly would be referred to Britain’s Competition Commission for review.