Rivals stall Safeway solution

J Sainsbury and Asda are said to be "dragging their heels" in negotiations with the Office of Fair Trading about undertakings in the drawn-out bid battle for the rival supermarket group Safeway.

The two, along with Tesco, were blocked from making a full bid last months by the Secretary of State for Trade and Industry, Patricia Hewitt. Wm Morrison, the Bradford-based stores group, was given clearance to bid provided it sold off 52 Safeway stores.

The other three bidders are allowed to buy those stores, and the OFT is currently in talks with all four parties to obtain undertakings allowing Morrisons to sell them.

Once those undertakings are agreed, Morrisons will be free to resume its bid. The Bradford group offered £2.9bn back in January and is expected to pitch a renewed bid at the same level, though it may have around £600m of cash in the offer to appease some shareholders.

However, sources close to the process said it was being held up by Sainsbury's and Asda, the two bidders most disappointed by Ms Hewitt's decision. According to a lawyer involved in the talks, the two are "dragging their heels". Although there is no formal deadline, it was hoped that undertakings would be agreed by early next month.

This will raise speculation they may make a legal challenge to Ms Hewitt's ruling, though Sainsbury's has ruled this out, and within Asda it is believed that suing the Government would be unwise.

The bid battle has done little for Safeway. Figures due out this week are expected to show further falls in sales.