According to a statement released by Sainsbury's today, it would offer equal amounts of cash and Sainsbury's shares for the store. This would put a value on Safeway shares of more than 300p each. Sainsbury's said it would satisfy the cash consideration from further borrowing. The deal would be worth £3.16bn compared to Morrisons £2.9bn bid.

But Sainsbury's and Safeway are not as complementary geographically as Safeway and Morrisons and if successful, J Sainsbury would close around 90 stores to satisfy competition issues. The store's ceo Sir Peter Davis said that it will file a merger notice with the Office of Fair Trading as soon as possible.

'Over the past year we have looked at the possibility of combining with Safeway in order to offer more customers greater choice and a superior food proposition throughout the UK,' said Sir Peter. 'Safeway's recent decision to relinquish its independence offers us a unique opportunity to acquire a large number of stores.' According to some analysts, Sainsbury's was surprised by Morrisons bid last week. The acquisition would put Sainsbury's in a much stronger position with rivals Tesco and third placed Asda. However, an acquisition by Morrisons would put Sainsbury's position behind market leader Tesco under threat. One analyst has suggested that Asda, part of the Walmart group is likely to throw its hat into the ring with a further bid.

Sainsbury's also released its third quarter trading statement for the 12 weeks to January 4 today and showed strong Christmas trading and total sales up four per cent on the same period last year and like-for-like sales (excluding petrol) up 2.8 per cent.

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