THE gloves are off in the fight for Safeway after the world's biggest retailer yesterday signalled its desire to add the supermarket chain to its stable.

Wal-Mart, which took over Asda in 1999, announced it was poised to make a full cash bid if it gets clearance from the Office of Fair Trading.

Three store chains are now fighting it out for the UK's fourth-largest supermarket group, although Asda and Sainsbury's are shadow boxing at present until firm offers are put on the table.

Only Morrisons has revealed its hand, but some analysts believe it may be able to build on its £2.56bn offer.

Morrisons' all-paper bid started at £2.9bn when it promised Safeway shareholders 1.32 of its own shares to buy the group. Subsequent devaluation of its stockmarket value has reduced the impact of its effort last Thursday to catapult itself to number three in the UK store chart.

Anthony Platts, retail expert with stockbrokers Wise Speke said: "The whole bid process may go on for months and the shopper will gain from competition in prices in the meantime."

In addition to Morrisons' all-paper deal, Sainsbury's is considering a part-paper, part-cash move, while the superior buying power of Asda's parent company means the attractive proposition of hard cash will be available.

Tony De Nunzio, president and chief executive of Asda, refused to be drawn on a price but said US group Wal-Mart had the financial muscle to attract Safeway's shareholders.

Wal-Mart generated net sales of nearly 32bn US dollars (£20bn) in five weeks to January 3, almost six times as much as the amount likely to be needed to secure Safeway.

If Wal-Mart is successful in buying Safeway, the combined group's market share would be close to Tesco's 26.8 per cent, leaving Sainsbury's a distant third with 17.4 per cent.