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Coo-op agrees to buy Somerfield

16/07/2008

The Co-operative Group, Britain's fifth largest supermarket chain, has finally agreed to buy rival Somerfield for £1.57bn, after the Co-op first expressed interest in April. The deal will reinforce the supermarket's position in the UK's food retail market.

Once the sale has completed, the Co-op will have more than 3,000 stores and a market share of 8.3%, bringing it nearer to W M Morrison, the next supermarket on the ladder.

It is thought the Co-op may decide to sell some of the stores it has bought. Morrisons, Waitrose and Iceland are among potentially interested parties.

Some of Somerfield's 900 outlets might also be sold on to rivals such as Tesco and Asda to satisfy the Office of Fair Trading's competition concerns. It has been suggested that the Somerfield name will disappear from the high street as stores are rebranded.

Manchester-based Co-op has more than 4,300 UK retail outlets and employs 85,000 people. The group aims to double its profits over the next three years.

Somerfield is owned by a consortium that includes the private equity firm Apex, Barclays Capital and property magnate Robert Tchenguiz. The supermarket runs 880 local grocery retail stores across the UK. In the year to April 2008, it had net sales of £4.2bn and earnings before interest, tax, and depreciation of £233m.

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