Morrison shares fall as clock starts ticking on Safeway bid

William Morrison Supermarkets set the clock ticking on its £2.2bn bid for Safeway yesterday, though a further fall in its share price means it faces an uphill struggle.

The posting of its offer document yesterday means the company has 60 days to convince both sets of shareholders of the merits of the deal.

Sir Ken Morrison, the chairman, said the group was capable of absorbing a business twice its size and urged shareholders to accept it. "We strongly urge you to support this offer," he said. "It is the only offer which is actually on the table."

Wm Morrison has made a formal, all-share offer for Safeway but J Sainsbury, Wal-Mart/Asda, Kohlberg Kravis Roberts, Philip Green and Tesco have all made indicative bids depending on clearance from the Office of Fair Trading. Safeway has withdrawn is recommendation of the Morrison bid after the battle turned into a six-way auction.

Morrison's shares suffered a further 11p fall to 158.5p yesterday, valuing its Safeway bid at just 209p a share. This is well short of the Safeway share price which closed 2p higher yesterday at 318p.

The Morrison offer document details £150m of cost savings, half of which will come from increased buying power. The other half will come from closing Safeway's head office by 2005 and cutting other central costs.

The company had fun with one of its circulars by including a quote from a rival bidder singing the praises of Sir Ken Morrison. The document quotes Allan Leighton, the former Asda chief executive who is now in Philip Green's bid camp, saying: "This guy is the best retailer around. He is streets ahead of everybody in terms of retailing. He's very focused on the product and the stores." The comment was made before it became known that Mr Leighton was part of Mr Green's bid team.

Morrison makes much of the experience of its management team saying that Sir Ken has spent 50 years with the company while his two joint managing directors, Bob Stott and Marie Melnyk, have notched up 28 years and 20 years respectively.

Sir Ken now has a tough job selling his offer to his own shareholders, who have seen Morrison's shares drop sharply on news of the surprise bid. Sir Ken, 71, has admitted he is likely to come under pressure to clarify his management succession plans, given the perceived "execution risk" of the Safeway takeover. It is understood that the plans have been revealed internally but Sir Ken is not yet ready to go public. Asked if he would reveal his plans if shareholders made it a condition of their acceptance, he said: "I don't think it will."

Separately, it emerged yesterday that Carrefour, the huge French hypermarket retailer, is unlikely to bid for Safeway because it believes it is too small.

Paul-Louis Halley, the head of the family that is Carrefour's largest shareholder, said: "Safeway on its own is too small to compete. No one can match the power of Britain's top three supermarkets."