Wal-Mart goes shopping for Safeway shares

The five-way battle for the Safeway supermarkets will intensify this week after it emerged that Wal-Mart, the US owner of the rival Asda chain, has been trying to build a share stake in Safeway ahead of a crucial Department of Trade and Industry ruling.

Wal-Mart is understood to have offered to buy shares in Safeway from some of the chain's biggest institutional investors.

Under takeover code rules Wal-Mart is the only bidder allowed to acquire shares in Safeway, though the opportunity would end if, as expected, the DTI decides to refer its potential bid to the competition commission along with those of Tesco and Sainsbury's.

It is thought that Wal-Mart is willing to pay a significant premium to Safeway's Friday closing price of 284p in an effort to build a stake of as much as 15%.

Safeway's ten largest shareholders, including Bernstein, Fidelity, Brandes and Scottish Widows, control 54% of the company between them.

Analysts expect Safeway investors who receive the offer to hedge their bets on the outcome of the bid battle by selling part of their holdings to ensure they get some cash for their shares.

They would then hold the rest on the chance that they could extract a greater price as the battle intensifies.

Wm Morrison, the only confirmed bidder and the party facing the least regulatory problems, is today expected to press home its case by announcing a strong set of results and detailing a buoyant trading statement for the start of this year.

Pre-tax profits are expected to be about £275m. Investors will also look for guidance from the chairman, Sir Ken Morrison, on whether he will inject a cash element into his all-share offer.

However, the 71-year-old Bradford retailer is unlikely to be drawn on his bid tactics and will instead attempt to focus on demonstrating the strengths that led to the strong trading figures.

It is unclear whether entrepreneur Philip Green, the fifth potential bidder, will be referred by the watchdog. He has extensive high street interests in the clothing sector.