Sainsbury's quits Somerfield chase

J Sainsbury has dropped its plans for the possible purchase of 171 stores from Somerfield after deciding that the regulatory process was likely to be too costly and time consuming.

The proposal was referred to the Competition Commission in June, but Sainsbury's has now asked for the investigation to be set aside.

The deal was part of a now-abandoned bid for Somerfield by entrepreneurs John Lovering and Bob Mackenzie.

The pair had bid 120p per share for Somerfield with part of the funding coming from the side-deal to sell on a package of stores to Sainsbury's. But even when the bid was rejected by the Somerfield board in June, Sainsbury's continued to seek regulatory clearance, in case a fresh bid emerged.

Yesterday Sir Peter Davis, Sainsbury's chief executive, said: "I was disappointed with the outcome of the regulatory process [when the OFT referred the Lovering bid to the Competition Commission]. However, given the current level of regulatory uncertainty in the food retail sector, we have decided not to pursue the transaction any further."

Analysts feel the move makes it very difficult for Mr Lovering to revive his bid, though he is barred from returning with another offer until December. A spokesman for Mr Lovering said: "We were disappointed by the regulatory decision to refer the bid, which has forced Sainsbury's to pull out."

Sainsbury's would not comment on whether its decision was related to the ongoing bid battle for Safeway, which this week saw the Competition Commission deliver its report on four of the bids to the Department of Trade and Industry.

Somerfield had always insisted that it had no intention of selling the stores directly to Sainsbury's. It said: "We are not particularly surprised by this decision. The stores were never for sale." Somerfield is planning to concentrate on smaller convenience stores and refurbish its Somerfield and Kwik Save branches.