£1.56bn deal for Co-op to buy rival

Jul 17 2008 by Peter McCusker, The Journal

SUPERMARKET chain the Co-operative Group has agreed a £1.56bn takeover of rival Somerfield.

The deal will cement the Co-op’s position as the UK’s fifth biggest food retailer, with sales of about £8bn and a market share of approximately 8%. It will also have more than 3,000 outlets.

Co-op chief executive Peter Marks said the acquisition would provide “rocket fuel” for the group’s growth plans.

Mr Marks said the deal, which is subject to regulatory approval, would be good news for consumers and for competition in the grocery market.

“We will create a stronger fifth player in food and a convenience store chain with unrivalled geographic reach,” he said.

The Co-op, which is a mutual company owned by 2.5 million members, unveiled a three-year plan in April to double profits and invest £1.5bn in transforming its retail estate.

As well as currently being the UK’s fifth largest food retailer, it is the third largest pharmaceuticals chain, the biggest provider of funeral services and the largest independent travel business in the country.

Somerfield comprises 880 outlets across the UK and generated net sales of £4.2bn in the year to April, with underlying earnings of £233m.

Its owners, a consortium including property tycoon Robert Tchenguiz, private equity firm Apax and investment bank Barclays Capital, have been looking for a buyer for some time.