Somerfield tempted by takeover offer

THE ICELANDIC INVASION Healthy pensions system and share rises credited with funding buying spree

SHARES IN Somerfield shot up 14 per cent yesterday after the supermarket group revealed that it had received a pounds 1.03bn takeover approach from Baugur.

The Icelandic conglomerate, which already owns a string of UK retail businesses, laced its prospective 190p-per-share cash offer with pre-conditions, including the stipulation that Somerfield's existing management team stays on.

It is the third takeover approach that the struggling supermarket group, home also to the Kwik Save chain, has received in the past 18 months.

In a statement confirming a report in yesterday's Independent, Somerfield said it was "investigating the approach" but warned there was "no certainty" that an offer would follow. "The board will make a further announcement in due course," it added.

Speculation that Baugur, which started life as a discount food retailer, would pounce on Somerfield has mounted since the Icelandic group sealed its pounds 326m purchase of Big Food Group, owner of the Iceland chain. Baugur first started building a stake in Somerfield in December 2002 when the shares traded at about 75p; it has since amassed a 5.55 per cent shareholding. But Baugur was tight-lipped yesterday over its intentions for Somerfield and its plans are understood to be at a very early stage.

A well as insisting that Steve Back continues as chief executive, Baugur has demanded access to Somerfield's books. Its pre-conditions include winning the board's blessing and striking an agreement with the trustees of the group's pension schemes over how the pounds 78.7m deficit is to be funded. Jon Asgeir Johannesson, 37, Baugur's ambitious chief executive, must also arrange financing.

Analysts said it would make sense to merge Iceland's 760 stores with Kwik Save's 525 because both chains target a similar cash-conscious shopper. Although Somerfield's 700 stores are angled towards a slightly more affluent "top-up" shopper, greater scale would enhance the group's buying power with suppliers, boosting its margin, they added.

Buying the group would give Baugur a 7.3 per cent share of the UK food retailing market, some way behind fourth-placed Wm Morrison, which controls 12.4 per cent. Analysts were divided over whether 190p per share represented fair value for the group. Paul Smiddy, at Baird Securities, said the offer was "cheekily low" "The key driver is Baugur realises it has overpaid for Big Food Group and is attempting to salvage some value out of that deal," he said.

Rhys Williams, at Seymour Pierce, said the mooted take out price was a "fair valuation", representing a 17 per cent premium on yesterday's opening share price. He added: "We would not rule out a further bidder entering the fray since the Somerfield fascia offers significant potential."

In 2003, John Lovering, the chairman of Peacocks, the discount retailer, led a group of investors that made takeover proposals worth 103p and 120p per share. Shares in Somerfield rose 22.5p to 184p yesterday.

Baugur, which also owns the clothing chains Karen Millen and Oasis, and Goldsmiths, the jewellers, built up its empire from a single discount food retailer called Bonus that it opened in 1989. Bonus now forms part of its Scandinavian retailing interests, which span 100 shops.

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific