Somerfield raised £51m through a shares placing yesterday to help finance the purchase of 114 stores from its rival supermarket group, William Morrison.
The £260m sale by Sir Ken Morrison of some smaller outlets will give Somerfield, which also trades under the Kwik Save brand, an extra 1.2 million sq ft of shop space at the convenience end of the market.
The deal is structured so that Somerfield itself paid £115m for about half the shops, while the rest were acquired by a special purpose company called Northwharf Investments, which is jointly owned by Barclays Bank and the businessman Robert Tchenguiz. Northwharf, which paid £145m, will lease the outlets to Somerfield.
Somerfield placed nearly 39.5 million new shares at 130p each, just below yesterday's opening share price of 134.5p.
Steve Back, Somerfield's chief executive, said: "This acquisition represents an excellent opportunity for Somerfield to grow its estate without a significant increase in gearing and to capitalise on its proven expertise in operating smaller stores.
"The addition of these stores will provide us with significant new space within the core Somerfield estate and is in line with our stated strategy of focusing on stores trading less than 15,000 sq ft." The deal includes a depot at Welwyn Garden City, allowing Somerfield to plug a gap in its infrastructure in the region.
Rhys Williams, an analyst at Seymour Pierce, said: "This acquisition could provide the company with an excellent opportunity to leverage Somerfield's expertise in operating smaller stores. In addition, it will also provide further benefits with regards to buying terms, and overhead and distribution costs ... the acquisition looks like a perfect fit for the group."
Morrison, Britain's fourth-biggest supermarket, bought the stores as part of its £3bn purchase of Safeway in March but the company did not want to operate the smaller sites.
Somerfield also put out a trading updateshowingsales growth at the Somerfield-branded supermarkets of 1.4 per cent for the 8 weeks to 9 October. Kwik Save grew0.2 per cent.Reuse content