Somerfield talks with Booker fail talks fail

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The Independent Online
SOMERFIELD, the supermarket group, dramatically broke off its merger talks with the Booker cash & carry group yesterday, less than two weeks after discussions started. The surprise move, which ends plans to create a food retail group with sales of pounds 11bn, came as Somerfield said the commercial risks of the deal to its shareholders outweighed potential rewards.

Booker quickly said it was in talks with another public company - believed to be Budgens, led by John von Spreckelsen - about an all share deal.

Somerfield said it informed Booker of its decision at 5am yesterday morning when David Simons, Somerfield's chief executive, telephoned Booker's chairman, Jonathan Taylor.

Relations between the two companies appeared to go rapidly downhill yesterday over the reasons for the deal's collapse.

Somerfield said that after conducting its due diligence on Booker it had decided it could not go ahead. This sparked immediate concerns over Booker's trading position leading to an angry reaction from the cash & carry company. Mr Taylor said: "We, as well as Somerfield, felt it was best not to proceed at this time. Both sides were seeing problems, some of which were to do with timing."

This implied that Booker had reservations about the ability of Somerfield's management to digest a second deal just six months after its pounds 1.2bn merger with Kwik Save. Other stumbling blocks were said to include Booker's concerns over the recent weakness of Somerfield's share price; a negative reaction from smaller independent retailers; and fears over a possible monopolies reference.

Mr Simons said: "We were very satisfied that we could have derived the synergies and that the strategic rationale was there, but he added that he "could not envisage" circumstances under which the deal would be revived.

The decision was welcomed in the City which marked Somerfield's shares 14.5p higher to 379.5p.

Booker shares fell 36.5p to 209p.