KKR bows out of Safeway running

After conducting due diligence on the UK supermarket chain, US buyout firm KKR has decided not to progress with a £3bn offer for Safeway but is rumoured to be now looking closely at leisure and hotels group Six Continents.

US buyout firm Kohlberg Kravis Roberts (KKR) has ended private equity interest in the bidding for Safeway, after it confirmed that it will not be pursuing a £3bn offer for UK supermarket chain.

In mid-January, the firm announced that it was considering a bid for the retailer following Wm Morrison’s £2.3bn all-share offer. It then commenced what it described as ‘significant due diligence’ with its advisor Credit Suisse First Boston.

However, in an announcement to the London Stock Exchange this morning, the firm said it had decided “for the time being not to progress its potential offer for Safeway any further,” adding that it would “continue to monitor the situation and keep its position under review.”

KKR’s decision to quit the bidding process leaves only Morrison’s offer on the table.  UK retailing trio Tesco, J Sainsbury and WalMart-backed Asda alongside serial retailing entrepreneur Philip Green are the other four interested parties.

Weekend press reports have linked KKR with a possible bid for Six Continents. The Financial Times newspaper on Saturday reported that KKR had spoken to Six Continents' chairman Ian Prosser, over a possible white knight backing for the group if, as expected, leisure entrepreneur Hugh Osmond tables an offer for the entire business this week.  

Analysts are predicting that a purchase price for the entire business would be in the region of E5.5bn. The weekend report also suggested that KKR has held separate talks with both Hugh Osmond and US private equity house Blackstone, about possible joint bids for the business.

KKR is believed to be interested in acquiring only part of the Six Continents empire, either the hotels or the bars and restaurants unit. A spokesperson for the firm  declined to comment, saying only that there was no connection between the Safeway withdrawal and the Six Continents press reports.

Six Continents last week announced plans to split its business into two separately listed operations. The company is currently the world’s biggest hotel group, operating the Inter-Continental, Crowne Plaza and Holiday Inn hotels as well as 2,000 pubs and restaurants including O’Neill’s and All Bar One.