Outlook: Booker comes along too soon

WHEN A company is on a roll, it is always tempting for management to believe it can do no wrong. So there should be an element of concern about Somerfield's latest piece of corporate buccaneering. Just six months after absorbing the lame duck Kwik Save in a no-premium merger, the company is talking to another wounded beast, this time Booker, the cash-and-carry operator.

The deal certainly has commercial logic. As with the Kwik Save deal, there are obvious benefits in cost savings and increased buying power. And it can push its own brand though the corner shops up and down the land that rely on Booker for their supplies.

But size isn't everything in this market. Though a combined Somerfield/Booker may rank ahead of Asda and Safeway in terms of buying power, it won't have the same commercial clout.

Perhaps the biggest reservation is the timing. Somerfield still faces an Olympian task in trying to integrate Kwik Save. Putting together 1,400 stores in four different formats is surely enough to be getting on with. Grappling with the struggling Booker business at the same time may be tempting fate.

Privately Somerfield executives would admit that the Booker deal has come along a bit too soon, but then in business, you have to take your opportunities when you can. And to be fair to David Simons, Somerfield's chief executive, he has put up with a barrow load of criticism but always delivered on his promises. Somerfield's shares have doubled in a year.

Mr Simons is an ambitious man who is the dominant personality in the Somerfield business. Chief executives of major companies ought to be ambitious. Snapping up Booker would take Somerfield to the brink of the FTSE 100, a position he would cherish. But it is at times like these, when things are going your way, that management teams must be careful not over-reach themselves.

Mr Simons is going the no premium merger route with his deals, which means that at least he is not overloading the company with debt or overpaying. But all three companies, Somerfield, Kwik Save and Booker, still have their problems. Taking on too much at once could be a decision the board and its shareholders live to regret.

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