Private equity house Kohlberg Kravis Roberts & Co (KKR) confirmed today it had approached British supermarket chain Safeway about bidding for the company but said its plans were at an early stage.
WM Morrison Supermarkets has already agreed an all-share £2.48 billion takeover of Safeway that looks set to be beaten by cash-rich rivals if they persuade regulators to allow consolidation in the highly competitive market.
The world's biggest retailer, Wal-Mart, has expressed interest in a cash bid, and Sainsbury, the second-largest British grocer, is also considering a cash and share offer.
Safeway stock closed at 307 pence yesterday, valuing the group at about £3.1 billion, and well above Morrisons' agreed deal.
KKR is best known for its $31 billion leveraged buyout of RJR Nabisco in 1989. Buyout firms typically purchase companies and look to boost efficiency and cut costs, before selling them on over three to five years.
Unlike the trade bidders, any private equity buyer for all of Safeway would not able to generate any synergy benefits from a takeover and would be left with the underperforming business for at least two or three years.
Safeway has appointed Schroder Salomon Smith Barney as its joint house broker alongside West LB Panmure to replace CSFB.