William Morrison Supermarkets has agreed a £2.9 billion bid for rival Safeway to net one of the sector's ripest takeover targets.
Safeway, Britain's fourth biggest supermarket chain, has long been seen as vulnerable to takeover, losing market share to bigger rivals in a sector increasingly dominated by a few big players.
Morrison, a family run business that has been expanding from its northern England heartland, said today Safeway shareholders would receive 1.32 new Morrison shares for every Safeway share held. The deal is worth 277.5p per Safeway share - a 30.3 per cent premium to the share's closing price yesterday.
The takeover follows a three-year turnaround drive at Safeway designed to win back shoppers. The group earlier reported it had enjoyed its best ever Christmas period, with like-for-like sales up 4.2 per cent - double market forecasts.
Morrison's shareholders will own 53 per cent of the enlarged group, which will have combined sales of £12.6 billion and a 16.1 per cent share of the highly competitive British grocery market.
Morrison is Britain's fifth-biggest food retailer.