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When Morrison took over Safeway who benefited?

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When Morrison took over Safeway who benefited? Introduction For this coursework I have to analyse the takeover of Safeway by Morrison and compare the gains and losses of the company and the companies shareholders and see over all who got the best deal. For my hypothesis I think that Morrison's got the best deal when they took over Safeway because they were taking hold of a significant percentage of the market, and if marketed properly would attract more customers, make better profits thus please the shareholders. Economic theory A takeover is a change in a corporation's controlling interest through either a friendly acquisition or a hostile bid. Hostile takeovers aim to replace the target company's existing management and are usually attempted through a public tender offer. Other takeover methods are unsolicited merger proposals to directors, accumulation of shares in the open market, or proxy fights. The reason Safeway was a target for Morrison was that it was losing profits and customers, which made it weak and therefore a target for a take over. When a firm becomes too big and dominates the market other companies may complain to the monopolies commission that this causes restricted competition and that the market is being monopolised by such a firm. When a firm dominates the market and wants to get even bigger, smaller firms could perish and thus reduce competition. This is what happened when the bigger firms such as Tesco and Asda/Wal-Mart tried to buy Safeways, they were denied the right to by the Monopolies commission, because, otherwise they would become too big and have too much power. ...read more.


In the supermarket market I don't think there will be a fear of this because the government is keeping a close eye on firms becoming too big, like when they stopped the bigger supermarkets buying Safeway. Research Over the period of 6 - 8 months there was a big competition to see who is the supermarket that was going to buy a stake in Safeway or take over it. There were bids from all supermarkets to buy percentage of Safeway. At the end it was Morrisons, with market share value of 6%. The reason why many giant supermarkets were interested was that Safeway was strong in the northwest. Safeway had accepted a bid from Morrison for approximately �3.2billion. The reason why Safeway had decided to sell their business or sell a percentage of they business was that they did not make enough profit but instead they profit had declined as the store sales in the 12 weeks to 3 January fell by 4.1%. At first glance it seems absolutely bizarre. Tesco's potential bid for Safeway looks like it doesn't have chance. Tesco already is the UK's biggest supermarket, and with 27% of our grocery shopping in its basket, it's nudging the limit that sets off the alarm bells at the competition watchdog. The fair trade authorities don't like it when one firm corners more than a quarter of its industry because it is not in the public's best interest - and a takeover deal that gives a company more than that will get pulled in for inspection. ...read more.


Morrison more than doubled their market share and have a huge opportunity to keep growing and make more profit. So I do not think only one company benefited, I think that they both have an opportunity to benefit from the takeover. It seems that Morrison's aren't using the full strength of the new ownership. They haven't lowered their prices or tried any new marketing techniques and that to me makes it look as if they are struggling to keep all of Safeways original customers and therefore need to work on getting them back before trying anything new. Safeways shareholders look like they got a good deal, because now that Morrison's are much bigger they could receive a better dividend. But some Safeways workers are losing their jobs because customers have moved to different shops since the takeover. So even though Morrison's had an opportunity to do well it doesn't look like they are achieving it so far, and at the moment look to be worse off then they were before which is bad for all stake holders; internal or external. Internal stakeholders will lose jobs and sources of income where as external stakeholders may lose local places to shop and the government (being an external stakeholder) will lose out on the taxes it will gain from the two huge companies. So even though both companies had an opportunity to do well is doesn't look like Morrison's seized its chance so therefore I think no company got a better deal but I think Safeways got a safer deal which has benefited them more than Morrison's risky deal has benefited them. ...read more.

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