Somerfield tempted by takeover offer
THE ICELANDIC INVASION Healthy pensions system and share rises credited with funding buying spree
Thursday 10 February 2005
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.
- 1 Britain First 'acting like Ukip henchmen' by invading meeting of activists in revenge for pub protest against Nigel Farage
- 2 Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
- 3 Tidal: Jay Z's Spotify rival streaming service criticised for making wealthy artists even richer
- 4 Brixton squat flats now costing up to £3k per month show how out of control rent is in London
- 5 A new (old) cure for MRSA? Revolting recipe from the Dark Ages may be key to defeat infection
Costa Concordia: Shipment of Mob drugs was hidden aboard cruise liner when it hit rocks off Italian coast, investigators say
Brixton squat flats now costing up to £3k per month show how out of control rent is in London
A new (old) cure for MRSA? Revolting recipe from the Dark Ages may be key to defeat infection
Jeremy Clarkson 'could be given minder' ahead of a potential Top Gear return
Germanwings plane crash: Transcript reveals passengers 'screamed for over five minutes' before plane crashed into mountain
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
Street preacher quoting from the Bible fined for calling homosexuality an 'abomination'
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
The West has it totally wrong on Lee Kuan Yew
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
iJobs Money & Business
£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...
£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...
Circa £45,000-£50,000 + benefits: Sheridan Maine: Are you a newly qualified ac...