Safeway (UK)
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Safeway was a chain of 479 supermarkets and convenience stores in the UK that is now part of Wm Morrison Supermarkets.
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Background
The chain was founded in the UK in 1962 as a subsidiary of the U.S. retailer Safeway Inc. The parent company was acquired by Kohlberg Kravis Roberts, or KKR in 1986, and in the following year, the UK business was sold to Argyll Stores.
Argyll Stores was the forerunner to Safeway plc, and a brief history is outlined below:
- 1980: Argyll Foods (later Argyll Group plc) formed through merger of Louis Edwards and Morgan Edwards.
- 1981: Argyll Foods purchases Oriel Foods (Lo·Cost, Mojo, Snowking).
- 1982: Argyll Foods acquires Allied Suppliers (Presto, Liptons, Galbraith, Templetons).
- 1984: Argyll Foods acquires Hintons stores in the North East.
- 1985: Presto becomes Argyll's principal facia for larger stores and Lo·Cost smaller stores. New Presto logo launched. Plans for new Presto regional distribution centres Bristol, Wakefield, Bathgate, Welwyn.
- 1986: Presto trades from 540 stores.
- 1987: Safeway trades from 133 stores. Argyll acquires Safeway UK.
Agryll Stores was listed on the London Stock Exchange when it changed its name to Safeway plc in 1996.
After some unprofitable years in the late 1990s it recovered with a programme of store refurbishments. In 2002 it had the fourth largest supermarket sales in the UK. However after perceptions that it was growing more slowly than other large UK chains and with a low share price, various takeover rumours circulated during 2002.
Takeover Bids
On January 9, 2003, the much smaller Wm Morrison Supermarkets, with 119 stores, made an offer to purchase the chain, offering 1.32 new Morrison shares for each Safeway share, with the cooperation of the Safeway board. However this served only to start a stampede of other potential buyers: J Sainsbury plc, ASDA / Wal-Mart, KKR (which would have been the second involvement), Trackdean Investments Limited (controlled by Philip Green, owner of BHS and Arcadia) and Tesco all said they were considering making offers.
They were all asked to make submissions to the Office of Fair Trading (OFT) for approval under the Fair Trading Act 1973. On January 23 Safeway's board dropped its recommendation of the Morrisons offer. Kohlberg Kravis Roberts later dropped its proposal. On March 19 the remaining proposals except for Trackdean's (which was said to raise no competition issues) were referred to the Competition Commission by the Trade and Industry Secretary, Patricia Hewitt. The report of the Competition Commission was made public on September 26. A takeover of Safeway by Sainsbury, ASDA or Tesco was "expected to operate against the public interest, and should be prohibited". However a takeover by Morrisons was held to be acceptable on the condition that 53 stores of the combined operation be sold, due to local competition issues. Patricia Hewitt accepted these recommendations.
Philip Green announced on 30 October that he was not proceeding with a takeover bid, on the basis that it was not clear whether approval could be obtained to sell off individual stores to other chains. On 15 December, Morrisons, the only remaining bidder, made a new offer of 1 Morrisons share plus 60 pence for each Safeway share, again with the cooperation of the Safeway board. On 11 February 2004 shareholders of both Wm Morrison and Safeway voted to approved the merger of the two companies, subject to the result of two High Court rulings later in the month.
Takeover Completion
On 8 March, 2004 the takeover by Morrisons was completed. Morrisons proceeded to rebrand the supermarkets under its own name and the convenience stores were initially rebranded as "Safeway Compact". In total, more than 200 stores were eventually sold off, either due to stipulations by the Competition Commission, or to size and location (see below for full details)
The retained stores were predominantly those over 25,000 sq ft with separate car parks. Within a few weeks, Safeway carrier bags were replaced by those of Morrisons and the new owner's brand name products began to appear in Safeway stores. The best parts of the Safeway own-brand offer, such as "The Best" range of high quality foods, and "Eat Smart" range of healthy foods, were adopted across the Morrisons chain.
In July 2004, Morrisons shocked the stock market with its first ever profits warning, largely caused by falling sales at Safeway stores. It emerged that Safeway had changed its accounting system just three weeks before the takeover and inflated its books by taking early bonus payments from suppliers, thus creating a deficit in excess of £180 million when the Morrisons accounting system was applied. New stores being converted, however, show sales up more than 20 percent under the Morrisons fascia.
Store Disposals
Originally 52 stores were to be compulsorily divested after the takeover, but this was reduced to 50 after one Safeway store in Sunderland was burned down and the lease ended on another in Leeds city centre. John Lewis Partnership purchased 19 to be part of its Waitrose chain, while J Sainsbury plc purchased a further 14, and Tesco bought 10 in October 2004.
In late 2004 it was announced that the 114 smaller 'Safeway Compact' stores were to be sold off to rival supermarket chain Somerfield in a two- part deal worth in total £260.2 million. One of the main reasons was the Morrisons 'Market Street' store format, which is better suited to larger stores, while Somerfield is known more for smaller outlets. Also, Morrisons' senior management had realised that the challenge of integrating the larger stores would keep them fully occupied in the short term.
In Northern Ireland all of the Safeway stores were sold off, most of them to Asda. This included a store in Bangor which actually opened after the Morrisons takeover.
Morrisons continued to sell and close stores not covered by the Competition Commission ruling which it felt did not fit with the scale and layout of its Market Street format. In total, around 200 stores were sold off by November 2005, leaving the chain with 360. The largest single purchase was that of five stores by Waitrose, bringing the firm as far north as Durham for the first time. Unlike other operators, most notably Tesco and Sainsbury's, Morrisons has chosen not to move into the convenience store sector.
In May 2005, Morrisons announced the termination of Safeway's joint venture convenience store/petrol station format with BP. Under the deal, the premises were split 50/50 between the two companies. Five sites were subsequently sold on to BP, while Morrisons sold the rest of its sites to Somerfield and Tesco, which both maintain a presence in this market sector.
Morrisons also sold Safeway's Channel Island stores, in Guernsey and Jersey, to CI Traders. The Douglas store was sold to Shoprite, the Ramsey store was sold to the Co-op, and the Gibraltar store is being marketed for sale.
Disappearance
The last of the 219 Safeway stores to be converted re-opened on 24 November 2005, while any remaining stores not suitable for conversion or sale were closed by 26 November 2005. This meant that the brand had disappeared from the UK after 43 years.
Separate Safeway companies continue to exist in the USA and Australia.
See also
External links
- Morrisons Website
- Safeway Archive
- Morrisons Employee Forum
- Green leaves Safeway door open; Guardian Unlimited; 31 October 2003
- Morrisons in £3bn bid for Safeway; BBC; 15 December 2003.
- John Lewis buys stores from grocer Morrison; Reuters, 25 March 2004
- Morrisons turns off Safeway supply chain systems; Computing, 29 June 2005
- Safeway disappears after 43 years