THE ICELANDIC INVASION: Baugur bids pounds 1bn for Somerfield
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, the 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 184.5p 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 Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
- 3 The Simpsons death: Creator Al Jean would 'kill himself' before character like Homer or Lisa
- 4 British man raped while urinating in bushes at Oktoberfest beer festival in Germany
- 5 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
Isis an hour away from Baghdad - with no sign of Iraq army being able to make a successful counter-attack
British man raped while urinating in bushes at Oktoberfest beer festival in Germany
George Clooney and Amal Alamuddin wedding: The famous congratulate actor and human rights lawyer after Venice nuptials
Isis, we are told, is a 'clear and dangerous threat to our way of life'. I’m sorry, but I just don’t buy it
Exclusive: 'Putin's Russia has been my biggest regret,' says Nato's outgoing Secretary General
'Women, walk wherever you want' posters taken down in Stamford Hill following 'unacceptable' signs separating men and women
There’s no excuse for Dave Lee Travis’s behaviour, but we need to keep a sense of proportion
Mark Reckless becomes second Tory MP to defect to Ukip in a month
Should gay sex be illegal? 16% of Britons think so
- < Previous
- Next >
iJobs Money & Business
NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...
£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...
Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...
£300 - £330 per day: Ashdown Group: SQL Developer (Stored Procedures) Watford...