KKR goes it alone for Safeway

The US buyout firm has confirmed that it is tabling a solo bid for UK supermarket chain Safeway, in what would be Europe’s largest PTP deal.

Having spent much of the week being touted as a possible participant in a joint bid for the UK supermarket chain, US buyout group Kohlberg Kravis Roberts (KKR) has declared its intention to bid for Safeway alone, making it the fourth group to confirm an interest in the 480-store chain.

 

KKR has joined J Sainsbury and William Morrison Supermarkets on the list of those bidding, with Wal-Mart-owned Asda having also indicated that it is a possible bidder. Morrison has seen the value of of its all-share offer diminish as investors become more pessimistic about its chances of succeeding and its share price has declined. 

 

KKR, responsible for Europe’s largest ever buyout, that of French switch and plug maker Legrand for E5.1bn last year, said in a stock market announcement this morning that it had “made an approach to Safeway and that it is considering its position in relation to a potential offer for the Company,” only adding that it was being advised by Credit Suisse First Boston. The CSFB link is symbolic, as the investment bank had previously been advising Safeway on the original offer from Wm Morrison.

 

KKR’s best chance of winning control of Safeway will come if bids from trade buyers are referred to the UK competition authorities. However, today’s Financial Times reports that a number of other financial buyers, namely Texas Pacific Group, Cinven and CVC, are also considering their options. The same report says that Safeway is currently refusing to give any financial information to private equity buyers for a deal that, if successful, would be Europe’s largest ever public-to-private transaction.

 

KKR is a previous owner of the store chain, although at a time when the group’s UK presence amounted to only 11 stores. KKR bought US Safeway Inc. for $4.8bn in 1986, later selling the UK stores to Argyll. KKR floated the US chain on the stock market in 1990.

 

If successful, KKR would probably look for a listing of the supermarket chain in three to five years. A future trade sale of the business would appear unlikely, given the market-dominant position of the three biggest operators, Tesco, Sainsbury and Asda and the resultant competition concerns.