Analyst barred by Somerfield for criticism

Somerfield, the supermarket group which is planning a stock market flotation next month, banned a City analyst from a presentation and store visit this week after he wrote a negative circular on the company.

Somerfield's jumpy reaction came as other analysts and institutions expressed grave reservations about the chances of the company floating at a satisfactory valuation. Somerfield is hoping for a pounds 500m price tag when it floats.

Frank Davidson of James Capel had been invited to a visit of four stores in the Swindon and Gloucestershire area along with 14 other analysts on Thursday. However, his invitation was withdrawn after he published a research note two days earlier.

It suggests that though the company will be able to improve profits in the short term, Somerfield's longer-term outlook is poor. His reservations include the widely held view that the store portfolio has suffered from under-investment and that it has too many high street sites and too few out-of-town superstores.

"The company can be floated but we expect it to be at a substantial discount to the rest of the sector," Mr Davidson said yesterday.

Somerfield defended its actions yesterday, saying it had tried to persuade Mr Davidson to delay publication until after the store visit. It claimed the research note was "not very helpful".

The spat with the City came as several fund managers expressed a lack of enthusiasm for the float. One said: "It seems like the kind of float where serious fund managers will leave it to the next man." Asked if he would subscribe for shares he said: "Probably not."

Another leading fund manager said the company's obvious problems such as high debt, low market share and powerful competitors would affect the price of the offer. "Clearly there are huge question marks over the company and we would expect it to be priced accordingly." Asked it he would subscribe for shares he said: "We might do but we have not seen the company yet."

The float could be pulled if the price is lowered to a level the company's backers found unacceptable. Somerfield said the retail marketing had gone well and that 19,000 private investors had registered for details.

Somerfield is Britain's fifth- largest supermarket group but has been weighed down by debts since the ill-starred pounds 2.1bn Isosceles buy out in 1989.

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