SUPERMARKET chain Asda has dismissed reports that it was preparing to take over smaller rival Safeway as "market speculation".
If true, the deal - said to be worth around £2.8bn - would create a powerful force in retailing and signal a challenge to Tesco, Britain's biggest supermarket chain.
Asda, part of the world's biggest retailer Wal-Mart, refused to comment on the report when contacted.
A spokesman said: "It is market speculation and we don't comment on market speculation."
Safeway said in a statement: "In the light of Press speculation, the board of Safeway wishes to clarify that it has had no approaches from, and is not in discussions with, any third party regarding a possible offer for the company."
Asda is the third biggest supermarket chain in Britain in terms of sales, after Tesco and Sainsbury.
The Office of Fair Trading said it would expect any take-over bid by Asda to be referred to EC Competition Commissioner Mario Monti, because of its size.
The price of Safeway shares went up five per cent following the reports, up 10.5p to 216.5p.
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