Co-op takeover of Somerfield progressing

Co-op’s takeover of Somerfield is edging closer in spite of disagreements over price. Somerfield told the Co-op that it needed to come up with a higher price.

Somerfield, which is partly owned by property tycoon Robert Tchenguiz, put itself up for sale earlier this year with an approach from supermarket giants Asda and Sainsbury’s. Several other bidders expressed interest but only the Co-op submitted a proposal for the business.

Mr Tchenguiz and Somerfield’s other owners, Apax, the British private equity group, and Barclays Capital, are believed to have put a price of £2 billion to £2.5 billion on the food retailer. However, bidders say their expectations are too high given the crisis in global financial markets, which has caused asset prices to decline and at the same time made it much more difficult for the bidders to secure financing.

There have been tensions between the owners of Somerfield which has resulted in a delay in the deal. Mr Tchenguiz is keen to sell his third stake given losses on his holdings in Sainsbury‘s and Mitchells & Butlers. However, the private equity groups say Somerfield is trading well and they are not eager to sell.

If a bid with the Co-op emerges, it is possible that the other supermarket bidders will look to strike deals with the mutual for certain stores.

It is believed that Asda would like some or all of Somerfield’s 200 larger outlets but any bid on its own would doubtless trigger a competition inquiry. Some, like Tesco, have struck opportunistic deals with Somerfield for small numbers of stores.

There have been signs of a turnaround at Somerfield with Paul Mason, the chief executive, saying that the company had experienced an exceptional Christmas. Somerfield controls less than 4% of the market.

Robert Tchenguiz recently placed his Laurel Pub Company into administration after failing to find buyers. Laurel’s 460 sites include a mixture of Yates’s, Hog Head, Litten Tree and Bar Med, Slug and Lettuce and La Tasca.

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