THE ICELANDIC INVASION: Baugur bids pounds 1bn for Somerfield

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 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, 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.

Life and Style
A teenager boy wakes up.
Life and Style
It is believed that historically rising rates of alcohol consumption have contributed to the increase
food + drink
The erotic novel Fifty Shades of Grey has already been blamed for a rise in the number of callouts to the fire brigade for people trapped in handcuffs
voicesJustine Elyot: Since Fifty Shades there's no need to be secretive about it — everyone's at it
Arts and Entertainment
Critics say Kipling showed loathing for India's primitive villagers in The Jungle Book
filmChristopher Walken, Bill Murray, Scarlett Johanssen Idris Elba, Andy Serkis, Benedict Cumberbatch, Cate Blanchett and Christian Bale
Life and Style
Playing to win: for Tanith Carey, pictured with Lily, right, and Clio, even simple games had to have an educational purpose
lifeTanith Carey explains what made her take her foot off the gas
Arts and Entertainment
The White Sails Hospital and Spa is to be built in the new Tunisia Economic City.
architectureRussian billionaire designs boat-shaped hospital for new Dubai-style Tunisia Economic City
Arts and Entertainment
You could be in the Glastonbury crowd next summer if you follow our tips for bagging tickets this week
Husain Abdullah returns an interception off Tom Brady for a touchdown
nflLeague has rules against 'sliding to ground on knees'
Life and Style
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
food + drink
Arts and Entertainment
Kylie performs during her Kiss Me Once tour
musicReview: 26 years on from her first single, the pop princess tries just a bit too hard at London's O2
Arts and Entertainment
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

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

SQL Developer (Stored Procedures) - Hertfordshire/Middlesex

£300 - £330 per day: Ashdown Group: SQL Developer (Stored Procedures) Watford...

Day In a Page

Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?
Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

Homegrown ballerina is on the rise

Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
Education, eduction, education? Our growing fascination with what really goes on in school

Education, education, education

TV documentaries filmed in classrooms are now a genre in their own right
It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

It’s perfectly reasonable to negotiate with villains like Isis

So why don’t we do it and save some lives?
This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

Is a sub-2-hour race now within sight?

Dennis Kimetto breaks marathon record
We shall not be moved, say Stratford's single parents fighting eviction

Inside the E15 'occupation'

We shall not be moved, say Stratford single parents
Air strikes alone will fail to stop Isis

Air strikes alone will fail to stop Isis

Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
Nadhim Zahawi: From a refugee on welfare to the heart of No 10

Nadhim Zahawi: From a refugee on welfare to the heart of No 10

The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
Witches: A history of misogyny

Witches: A history of misogyny

The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
Shona Rhimes interview: Meet the most powerful woman in US television

Meet the most powerful woman in US television

Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

Endangered communities photographed 'like Kate Moss'

Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style