Somerfield, the struggling supermarket group, announced the abrupt departure of David Simons as chief executive yesterday as it revealed that talks that could have led to a takeover of the business had collapsed.
Mr Simons, 53, who has been chief executive since 1993 was told of the decision yesterday morning. He will be replaced by Alan Smith, a former Kingfisher director who is currently the chief executive of Punch Taverns. The company said it expects to name a new executive chairman soon to replace Louise Patten.
Lady Patten, the wife of the former Conservative minister John Patten, said yesterday: "The issue was a relatively recent one with the non-executives becoming increasingly concerned about the performance of the business."
Mr Simons will be paid compensation equivalent to 12 months' salary, which was £460,000 last year. He also has a substantial share option package, though this is worthless due to the collapse in the share price. Mr Smith's terms were not disclosed, though it is believed Somerfield paid Punch a small "transfer fee" for his services.
Somerfield shares fell 4.75p to 57.25p yesterday, though analysts expressed surprise that the decline was not sharper: Philip Dorgan, an analyst at WestLB Panmure said: "Somerfield is likely to fall into loss next year. It has an unattractive store base and the market is getting tougher. The shares have further to fall."
Andrew Fowler, a supermarket analyst at Morgan Stanley Dean Witter, added: "It is a very brave person who owns these shares on the basis that Somerfield will be able to successfully trade its way out of this corner. It will be a Herculean task."
Somerfield issued a statement earlier this month that it was in talks with several parties that could lead to a takeover. The bidders included Apollo, a venture capital group that was linked to Mr Simons. With the board reportedly split on the merit of taking Somerfield private and Mr Simons' relationship with the finance director Martin Gatto deteriorating, a committee of non-executives was formed to study the options.
With none of the talks looking likely to lead to a credible offer, Somerfield decided to terminate all talks.
Mr Simons' departure from Somerfield marks the end of a volatile period in charge of the group. When he joined from Storehouse in 1993 the business, then called Isosceles was weighed down by more than £1bn of debt following the buyout of the Gateway Foodmarkets stores. With the name changed to Somerfield, Mr Simons succeeded in floating the company on the stock market in 1996, though the price had to be cut twice to get the issue away.
The shares had a brief surge after the company's merger with fellow struggler Kwik Save two years' ago. But it soon became apparent that the deal had been ill-judged. With trading deteriorating, the shares plunged and Mr Simons has been desperately seeking another merger partner ever since.
Somerfield sold 46 of its largest stores for £309m last month and said it was planning to concentrate on the convenience store market. But it has yet to sell 350 Kwik Save stores which have been performing poorly.
One analyst said yesterday: "Does this business have a future? I don't think so. It was put together from a load of bits and it will end up as a load of bits."Reuse content