Statement re Possible Offer

Statement re Possible Offer 

    LONDON--(BUSINESS WIRE)--Jan. 22, 2003--

                               Tesco PLC
                    Possible offer for Safeway plc

Not for release, publication or distribution in or into the United
States of America, Canada, Australia or Japan

Sir Terry Leahy, Chief Executive of Tesco, said:

'Our success has been built on competition and championing the
consumer. We have always understood that competition policy limited
consolidation in our industry. The authorities are now being asked to
consider a major structural change among the four national supermarket
chains. Internationally, and in the UK, we are a consumer champion, we
successfully run a diverse range of store types and we have a world
class management team. We therefore believe the interests of consumers
would best be met if Tesco led any restructuring.'

Summary

- The board of Tesco PLC ('Tesco') today announces that it is
considering making an offer (the 'Offer') to acquire Safeway plc
('Safeway'). Any such Offer would be subject to regulatory clearance
and Tesco is making a submission to the Office of Fair Trading.

- If made, the Offer will be an appropriate mix of cash and new Tesco
shares and will be set at a level which will be compelling to Safeway
shareholders and create value for Tesco investors.

- If a restructuring of the market is to involve the three major
players, Tesco is best placed to lead this change. Uniquely, Tesco
brings together the qualities of a consumer champion, experience
across a broad range of store types and a world class management team.
In particular:

    -- more customers would benefit from Tesco value, quality, choice
    and service;

    -- Tesco has a proven track record of creating value for investors
    by improving stores and businesses it acquires; and

    -- Tesco is confident of its ability, given its experience, to
    undertake an orderly and well executed restructuring of Safeway's
    store portfolio.


Competition and local communities

- Tesco flourishes on competition and will work with the regulatory
authorities to ensure that the market remains competitive after any
consolidation.

- In 2000, the Competition Commission reported that the industry was
competitive, that excess profits were not being earned and that all of
the major players were able to compete effectively based on the
current market structure.

- If the competition authorities are to allow the four majors to
become three, Tesco is ready to work with them to promote competition
and consumer choice. Tesco has a strong track record and extensive
experience as the top performing food retailer in the UK. As a result,
Tesco believes that it is best placed to lead such a restructuring to
the benefit of the British consumer.

- On local choice, the Safeway portfolio of stores is largely
complementary to Tesco's own estate. As a result, Tesco believes that
it should be able to retain around three-quarters of Safeway's stores
while ensuring competitive local markets.

- Consumers would welcome a Tesco store in many more local
communities.

- Many communities would benefit from more local jobs and the
extension of Tesco's community programmes.

Customers would benefit

- Tesco has the most popular customer offering in the UK - more
customers choose to shop at Tesco than any other retailer and they are
more loyal, resulting in the highest sales per square foot among the
major supermarket groups(1).

- Expanding Tesco's coverage of the UK would offer this choice to
many more customers.

- Tesco would reduce Safeway's prices to Tesco levels overall;
regular price checks show that no-one is cheaper than Tesco across a
broad basket of products(2). Safeway's prices are currently some 11.7%
higher than Tesco's prices based on the 6,000 key lines found in both
store chains(3).

- Tesco would roll out its Clubcard programme to the Safeway stores.

- Customer choice, services and quality would also improve. Customers
like Tesco's broad product range from Value to Finest and from DVDs to
home shopping and financial services.

Employees would benefit

- Tesco offers the best overall benefits package in the industry,
including popular profit share and save as you earn schemes. These
terms and conditions would be extended to Safeway's employees.

- Tesco has had a partnership with the Trade Union, USDAW, since 1998
that has contributed to Tesco's success.

- As Tesco improved the performance of the retained Safeway stores,
it would create many store jobs, offsetting job losses from the
closure of Safeway's head office.

Safeway under Tesco ownership

- From convenience stores to hypermarkets, Tesco successfully
operates a diverse range of store types (Express, Metro, Superstore
and Extra). Tesco is therefore best placed to improve the performance
of Safeway's portfolio of stores by applying this expertise.

- In light of this and following a detailed review of Safeway's store
portfolio, Tesco believes that it can raise the performance of the
retained Safeway stores significantly. Tesco achieves industry leading
weekly sales densities of some £22.33 per sq. ft.(4) compared to
Safeway's £17.30 per sq. ft.(5).

- In addition to opportunities to increase revenue, Tesco has
identified significant cost savings through improved operational
efficiency, central cost savings and supply chain benefits.

Tesco's proposal

- Because it can deliver the most value from Safeway's portfolio of
stores, Tesco believes that it would be able to present Safeway
shareholders with a compelling offer. Any Offer would comprise an
appropriate mix of cash and new Tesco shares.

- The share component would offer Safeway's shareholders
participation in the value created.

- If made, Tesco's offer for Safeway would be subject to Tesco
shareholder approval and would include customary terms and conditions
for a UK public offer.

Enquiries:

Tesco
Lucy Neville-Rolfe                              [phone]
Steven N. Butler                                [phone]

Greenhill & Co. International LLP               [phone]
(Financial adviser to Tesco)
Simon Borrows
David Wyles

Cazenove & Co. Limited                          [phone]
(Joint brokers to Tesco)
John Paynter
Julian Cazalet

Deutsche Bank AG London                         [phone]
(Joint brokers to Tesco)
Charlie Foreman

Maitland Consultancy                            [phone]
(PR adviser to Tesco)
Angus Maitland
Philip Gawith
*T


Notes:

1. Source: From data published by an independent grocery industry body
identifying the sales per square foot per week for WM Morrison
Supermarkets plc, Asda (a wholly owned subsidiary of Wal-Mart Stores,
Inc.), Safeway and Tesco for 2001/2002 and J Sainsbury plc for
2000/2001.

2. Source: From data commissioned by Tesco on a weekly basis from an
independent market research company identifying the average price
difference between prices charged by Tesco, J Sainsbury plc, Asda (a
wholly owned subsidiary of Wal-Mart Stores, Inc.) and Safeway,
weighted by Tesco sales for each line, in respect of 6,000 to over
10,000 matching lines.

3. Source: From data commissioned by Tesco from an independent market
research company identifying the average price difference between
Tesco and Safeway, weighted by Tesco sales for each line, in respect
of 6,000 matching lines. The data was collated in relation to prices
for the week commencing 6 January 2003.

4. Source: Tesco annual report and accounts for the year ended 23
February 2002.

5. Source: Safeway annual report and accounts for the year ended 30
March 2002.


This press release does not constitute an offer to sell or the
solicitation of an offer to buy securities in any jurisdiction.

The availability of any Offer to persons outside the United Kingdom,
if made, may be affected by the laws of other jurisdictions. Such
persons would need to inform themselves about and observe any
applicable requirements of those jurisdictions.

Unless Tesco determines otherwise, any Offer will not be made,
directly or indirectly, in or into, or by use of the mails or by any
means or instrumentality (including, without limitation, by means of
telephone, facsimile, telex, internet or other forms of electronic
communication) of interstate or foreign commerce of, or by any
facilities of a national securities exchange of, the United States,
nor will any Offer be made in or into Canada, Australia or Japan and
any Offer will not be capable of acceptance by any such use, means,
instrumentality or facility or from within the United States, Canada,
Australia or Japan. Accordingly, copies of this announcement and any
Offer announcement or documents are not being, and must not be, mailed
or otherwise forwarded, distributed or sent, in whole or in part, in,
into or from, the United States, Canada, Australia or Japan.
Securities may not be offered or sold in the United States absent
registration under the US Securities Act of 1933 or an exemption from
registration.

This announcement contains a number of forward-looking statements
relating to Tesco with respect to, among others, the following:
financial condition; results of operation; the businesses of Tesco;
future benefits of the transaction; and management plans and
objectives. Tesco considers any statements that are not historical
facts as 'forward-looking statements'. They involve a number of risks
and uncertainties that could cause actual results to differ materially
from those suggested by the forward-looking statements. Important
factors that could cause actual results to differ materially from
estimates or forecasts contained in the forward-looking statements
include, among others, the following possibilities: future revenues
are lower than expected; costs or difficulties relating to the
integration of the businesses of Tesco, or of other future
acquisitions, are greater than expected; expected cost savings from
the transaction or from other future acquisitions are not fully
realised or realised within the expected time frame; competitive
pressures in the industry increase; general economic conditions or
conditions affecting the relevant industries, whether internationally
or in the places Tesco does business are less favourable than
expected, and/or conditions in the securities market are less
favourable than expected.

Greenhill & Co. International LLP ('Greenhill'), which is regulated in
the United Kingdom by the Financial Services Authority, is acting
exclusively for Tesco as financial adviser (within the meaning of the
rules of the Financial Services Authority) and for no-one else in
connection with the possible Offer and will not be responsible to
anyone other than Tesco for providing the protections afforded to
clients of Greenhill nor for providing advice in relation to the
possible Offer.

Cazenove & Co. Limited, which is regulated in the United Kingdom by
the Financial Services Authority, is acting as joint broker (within
the meaning of the rules of the Financial Services Authority) to Tesco
and for no-one else in connection with the possible Offer and will not
be responsible to anyone other than Tesco for providing the
protections afforded to clients of Cazenove & Co. Limited nor for
providing advice in relation to the possible Offer.

Deutsche Bank AG London, which is regulated in the United Kingdom by
the Financial Services Authority, is acting as joint broker (within
the meaning of the rules of the Financial Services Authority) to Tesco
and for no-one else in connection with the possible Offer and will not
be responsible to anyone other than Tesco for providing the
protections afforded to clients of Deutsche Bank AG London nor for
providing advice in relation to the possible Offer.

   Short Name: Tesco PLC
   Category Code: OFD
   Sequence Number: 00001653
   Time of Receipt (offset from UTC): 20030121T232830+0000