Statement re. Safeway Plc

Statement re. Safeway Plc 

    LONDON--(BUSINESS WIRE)--March 19, 2003--

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


            TESCO RESPONSE TO SAFEWAY COMPETITION DECISION

Following the Government's decision to refer all potential supermarket
bids for Safeway to the Competition Commission, Tesco said today that
it will engage constructively with the Commission and work to secure
the best outcome for the consumer.

The UK's leading supermarket said it would remain focussed on its core
strategy and on doing a great job for customers.

Responding to the announcement, Chief Executive, Sir Terry Leahy,
said: 'I am not surprised by this decision, as we have always
understood that competition policy limited consolidation of the four
national players in our industry.

'As we expected, the authorities will now look at the implications of
major structural change including the possibility of consolidation
from four national players into only three. If the four national
players are to be restructured into three, we believe consumers would
be better off if Tesco led that 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.'

Tesco also expressed concern on the part of consumers that the
Government's decision might allow a financial bidder to buy Safeway
and then break up and sell on parts of the business. Any such move
should be subject to prior Government clearance in the normal way -
and there should be a reference to the Competition Commission if it
seems likely to lead to a four into three consolidation by the back
door.

Sir Terry continued, 'During the reference, and no matter what the
outcome, we will remain focussed on delivering the best for our
customers. We have already stepped up the pace in the UK as
demonstrated by another set of outstanding results at Christmas. Tesco
has the most popular customer offering in the UK - more customers
choose to shop at Tesco than any other retailer. Our clear four-part
strategy continues both to drive growth in food, non-food, and retail
services and to develop our business internationally.'


Notes For Editors:

1.Tesco announced that it was considering a bid for Safeway on 22
January 2003. The original press release is attached at Annex A.

2. Tesco Christmas Trading Statement was issued on 14 January 2003.

3. Tesco Preliminary Results announcement for the year 2002/03 is due
to be released on 8 April 2003.


Enquiries:

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

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

Morgan Stanley                                                           [phone]
(Financial adviser to Tesco)
Simon Robey
Mark Warham

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



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 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 any facilities
of a national securities exchange of, the United States, nor will any
such offer be made in or into Canada, Australia or Japan and any such
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 1933 or an exemption from registration.

This announcement and the annex to it contain 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') is acting exclusively
for Tesco as joint financial adviser and for no-one else in connection
with the possible offer and will not regard any other person as a
client in relation to 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.


Morgan Stanley & Co. Limited ('Morgan Stanley') is acting exclusively
for Tesco as joint financial adviser and for no-one else in connection
with the possible offer and will not regard any other person as a
client in relation to the possible offer and will not be responsible
to anyone other than Tesco for providing the protections afforded to
clients of Morgan Stanley 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.


Annex A

                                                                                  22 January 2003

                               Tesco PLC

                    Possible offer for Safeway plc


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

o        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.

o        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.

o        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

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

o        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.

o        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.

o        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.

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

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

Customers would benefit

o        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).

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

o        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).

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

o        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

o        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.

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

o        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

o        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.

o        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).

o        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

o        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.

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

o        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.

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.

   Short Name: Tesco PLC
   Category Code: STC
   Sequence Number: 00003122
   Time of Receipt (offset from UTC): 20030319T160114+0000