Wal-Mart stalks revived Safeway

WOULDN'T a £5bn-plus Wal-Mart bid for Safeway provide the City with a perfect Christmas present? The world's largest retailer, which now owns Asda, is said to be stalking Britain's fourth biggest grocer.

Five years ago, merger talks between Asda and Safeway were abandoned because of an embarrassing leak to the Press.

Safeway has come a long way since then. As one leading analyst put it: 'It would make a great deal of sense from Asda's point of view, but Safeway is not interested at all. Wal-Mart would have to pay a good price of about 21 times earnings or 500p-a-share.

'Competition authorities would also frown. A combined Asda/Safeway group would have about 25% of the grocery market, about the same as Tesco.'

Safeway recently reported its eight consecutive quarter of outperformance. Like-for-like sales growth in the second-quarter was 5.4%, compared with 5% in the previous year.

If Wal-Mart does want to expand further outside the US, Safeway would fit nicely into its basket.