Duo stalking Somerfield set to raise offer

The entrepreneurs stalking Somerfield will this week put a higher offer to the supermarket's board in a last-ditch effort to start takeover talks.

It is understood John Lovering, the chairman of Peacocks, and Bob Mackenzie, the former chief executive of National Car Parks, will indicate that their consortium is willing to offer between 110p and 120p a share, worth up to £594m. Somerfield, which includes the Kwik Save chain, has already rejected the initial 103p-a-share approach and refused to talk to the pair.

The bidders are not willing to go hostile, needing the Somerfield board's co-operation for due diligence. They hope that the higher indicative offer will enable talks to begin, initially with Somerfield's advisers, Dresdner Kleinwort Wasserstein. No formal bid will be tabled without getting the Somerfield board onside.

If that doesn't work, Mr Lovering and Mr Mackenzie plan to walk away. Analysts said there was no point in them getting into "a bidding war with themselves".

Somerfield shares closed on Friday well below the offer price, at 93.25p, as its board dismissed the Lovering approach and the bid interest failed to flush out any other suitors.

Rejecting the offer, John von Spreckelsen, the chairman of Somerfield, said last week: "The board considers that the price indicated fails to reflect the value of the business. Somerfield has strong brands in Kwik Save and Somerfield, a solid strategy for delivering value to shareholders and excellent prospects."

The bidders, who are working with bankers HBOS and advisers Bridgewell, would sell off parts of the business once they have taken Somerfield private, and other supermarkets have already shown interest in buying some stores. But a major sticking point could be the price put on Somerfield's 1,300 stores, a property portfolio that was last valued in 1996. Some analysts believe the estate could be worth as much as £1.5bn.

Mr Lovering and Mr Mackenzie's management team for running Somerfield would include Ron Kirk and Richard Gibbs, of the Carlisle Retail Group consultancy, whose attempt to buy the Kwik Save chain from Somerfield was spurned three years ago.

The group employs 56,000 people and is the UK's fifthlargest food retailer. Somerfield's financial year ended yesterday and there will be a trading update in May ahead of annual results in July. The supermarket is expected to report pre-tax profit of £22.5m.