Share price inquiry after bid approach at Somerfield

The London Stock Exchange was yesterday scrutinising the record numbers of shares traded in Somerfield on Monday, the day before the Britain's fifth supermarket group formally announced it had received an informal approach for its business.

It is not clear how the indicative offer leaked into the market. But if the LSE finds evidence that people within the company were taking advantage of the information to buy shares, it will ask the City regulator, the Financial Services Authority, to investigate.

The Exchange never comments on specific cases, but a spokesperson said: "As a matter of course, we look at all unusual share price movements."

At the same time, the supermarket company was faced with an embarrassing situation to explain. John von Spreckelsen, the chairman, boosted his holding by buying 100,000 Somerfield shares on Thursday last week, the day before it received the approach.

A spokesperson for Somerfield said: "There is absolutely nothing sinister about it. It is just bad luck for John." Mr von Spreckelsen, who is currently on holiday in France, has made a paper profit of £21,000 on those new shares so far this week.

Somerfield, which also owns the Kwik Save chain in the UK, gained 23 per cent to 91p on its confirmation that it received a proposal on Friday containing a "possible offer" from an unnamed suitor.

The announcement prompted intense speculation about the source of the offer, with a number of sources pointing to John Lovering, the chairman of Peacocks, as the most likely bidder. Mr Lovering is a veteran retailer who headed up Schroder Ventures' buyout of the DIY chain Homebase from Sainsbury's in 2000.

Others names to surface as possible bidders included Philip Green, the billionaire owner of Bhs who has already decided to dip his toe into the supermarkets world with an approach for Safeway. As the only prospective Safeway suitor in the five-way bid battle for the group who has been given clearance by the competition regulators to go ahead with an offer, he may have the time also to consider a bid for Somerfield's 1,300 stores.

Musgrave, the Irish food distributor, which bought Budgens last year, and Marks & Spencer, which could use Somerfield's sites to expand its successful Simply Food chain that are situated in railway stations and city centres were also seen as potential bidders. Baugur, the Icelandic group, was also in the frame because it has built up a 3 per cent stake in Somerfield. But it is not thought to be interested in pursuing anything more ambitious.

Some of Somerfield's rivals ­ Wal-Mart-owned Asda and J Sainsbury ­ have not been completely discounted as being behind the offer. But analysts said their involvement was unlikely given their pre-occupation with the battle for Safeway.

The indicative offer was thought to be have been priced at 103p a share. Rhys Williams, at Seymour Pierce, said the value ranged between 100p and 110p a share and Paul Smiddy, at Robert W Baird Securities, placed it at 110p to 150p a share.

The source of the approach to Somerfield on Friday is thought to have included several caveats in the proposed deal. One complicated issue which any bidder would have to deal with would be that Somerfield has a variety of leasehold arrangements over many of its sites and holds the freehold of only a proportion of outlets operating under its own and the Kwik Save brands.