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Safeway: Ken sets out his stall but where's the cash?

Sir Ken Morrison is determined that his bid for Safeway should be taken seriously but he is going to have to offer more than is detailed in the document being sent to shareholders today.

The posting of the document sets the clock ticking. Safeway now has 14 days to respond and Morrisons 60 days to get the deal together. But a rival bid will change all that.

The indications are that Sir Ken will sweeten his £2.4 billion all share offer with some cash if, as seems likely, the Office of Trading gives it the go-ahead.

He certainly needs to judging from the statement accompanying the news of the offer document. This clearly sets out all the reasons why Morrisons would make a good fist of turning round Safeway: how it would deliver better value to customers, refurbish stores, shake up the supply side and generally revolutionise the culture at ailing supermarket. In short it does not tell shareholders anything they have not heard already.

The 71-year-old Yorkshire made it clear in his media charm offensive yesterday that he is not just interested in the £30 million break fee Morrison's will collect if Safeway goes to someone else. He really wants to take his company to another level by taking on the huge job of integrating Safeway.

His ambition is laudable. And after 35 years of steady organic growth there is no reason why Sir Ken should not be allowed a go at an acquisition. Nevertheless, until he offers more he will not get his way and the advantage Morrisons, down 4.5p to 165p today, has in being able to avoid a referral to the Competition Commission will mean little. Philip Green is set to thump a wad of notes on the table at some point after all.

Suggestions by Lehman that the ensuing bidding for Safeway could go as high as 500p per share if Tesco, Wal-Mart and Sainsbury are cleared may be fanciful. But offers are bound to go above Safeway's current price of 313p, down 2.5p today. Hopefully investors have taken some profit from the surge in Safeway's price this month, but they should still hang on for the rest of the ride.

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