SUPERMARKET chain Morrisons has announced it will begin overhauling Safeway stores in August.

The group plans to convert three stores a week in a transformation programme spanning three years, beginning with the Safeway megastore at Gamston, Nottinghamshire.

Shoppers reaped the first benefits of the takeover with prices lowered on more than 300 items at the largest Safeway stores yesterday.

The reductions follow £40m of in-store savings announced last week by rival Asda, fuelling speculation about a possible price war in the UK food retail sector.

Sir Ken Morrison, executive chairman of the group, hailed the completion of the £3bn takeover as "an exciting beginning for our new company".

Morrisons has a market share of more than 15 per cent and employs 145,000 staff. It expects the tie-up to create savings of £215m by the end of 2008. Integration of the 479-strong chain of Safeway stores to create a fourth major force in UK food retailing would begin quickly and effectively, said Sir Ken.

The process will see the 50 largest Safeway stores refitted by November, and 150 stores transformed by the end of next year.

Morrisons has pledged £525m a year for the integration programme, including £260m for conversion of Safeway stores and £420m over three years on infrastructure.

Morrisons will also open eight stores this year, with £900m allocated over three years for new openings and refits.