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Reuters reports that Safeway Plc, which agreed to be acquired by Wm. Morrison Supermarkets for the equivalent of about $4 billion (US) before Sainsbury announced that it would bid $5.15 billion (US) in stock and cash and Wal-Mart said it would bid $4.8 billion in cash, still prefers the initial suitor.

According to the story, only Morrison’s bid officially is on the table, and only Morrison’s bid is judged able to pass muster with regulatory authorities.

However, Safeway has agreed to cooperate with Sainsbury in the due diligence process, providing requested financial information to the company.

No word about how Safeway feels about a Tesco offer for its c-stores. (See story above.)

The battle over Safeway is one that could have a dramatic impact on the UK grocery industry, with currently has four major players -- Tesco, Sainsbury, Wal-Mart’s Asda Group, and Safeway. If either Sainsbury or Asda get Safeway, it would add to their ability to compete with market-leader Tesco, as well as shrinking the number of major UK grocery retailers by one.
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