Supermarket chain Morrisons will begin overhauling Safeway stores in August after the £3 billion takeover of its rival came into force yesterday.

The Bradford-based group plans to convert three stores a week in a transformation programme spanning three years starting with the Safeway megastore at Gamston, Nottinghamshire. Safeway has a branch in Haydon Wick, Swindon.

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

The reductions follow £40 million of in-store savings unveiled by rival Asda last week, fuelling speculation of an unfolding price war in the UK food retail sector.

Morrisons now has a market share of more than 15% and employs 145,000 staff. It expects the tie-up to generate savings of £215 million in the year ending 2008.

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

Integration of the 479-strong chain of Safeway stores to create a fourth major force in UK food retailing would begin "quickly and effectively", Sir Ken pledged.

This process will see the 50 largest Safeway stores refitted by November and 150 stores transformed by the end of 2005.

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

In addition to the conversion programme, Morrisons will open eight stores in 2004 with £900 million allocated over three years for new openings and refits.

The deal brings to an end one of the most hotly-contested takeover battles in recent UK corporate history, involving private investors and all the major supermarket groups.

Morrisons, which sparked the bidding war with a £2.9 billion offer for Safeway in January last year, claimed victory after overcoming competition concerns that ruled out many of its rivals.

It agreed to sell 52 stores by the end of this year including 48 outlets of Safeway. Four Morrisons branches at Ripon, Chester, Southport and Bramley will be swapped with the nearest Safeway store and rebranded in the central format.

Shares in Morrisons were unchanged from their opening price at 247.5p today as investors weighed up prospects for the enlarged group.