SHARES in Safeway were traded for the final time yesterday as the supermarket chain prepared for its £3bn takeover by Morrisons.

Morrisons, based in Bradford, will take over Safeway on Monday - 14 months after first making an offer for the UK's fourth largest chain.

The tie-up, which will create a chain of 550 outlets, is expected to lead to job cuts at Safeway's head office in Hayes, Middlesex, and could trigger a price war in the sector.

On Thursday, Asda fired the first shot in the battle to grab market share by unveiling £40m of in-store savings.

As part of the takeover, Morrisons has pledged to change the fascia and store design of more than 100 of the larger Safeway stores to mirror its core estate.

It is also considering the transformation of 178 medium-sized Safeway stores into a Morrisons Compact-brand to compete with rivals such as Tesco, which has a string of Metro-branded stores in town centres. The group will have a 16 per cent share in the sector to rival Sainsbury's as the third largest UK supermarket chain.

Analysts said the success of Morrisons could be measured by how well it dealt with the threat from Sainsbury's during the coming months.

Hilary Cook, of Barclays Stockbrokers, said: "It is not going to be easy because the market is so competitive, but Morrisons has a good format and track record. It is likely that Sainsbury's and Morrisons will have quite a scrap."

Morrisons, led by executive chairman Sir Ken Morrison, must sell 52 stores to comply with a competition watchdog ruling, with the disposal process expected to take up to 18 months.

Under the terms of the takeover, Safeway shareholders will receive 60p in cash and one Morrisons share for each of their shares when trading begins in the enlarged group on Monday.