Somerfield agrees to talks as sale looms

SOMERFIELD has agreed to enter into bid talks, raising the prospect of a £1bn-plus auction for Britain's fifth largest supermarket group.

The retailer, which owns more than 700 Somerfield and 520 Kwik Save stores, is being courted by Icelandic retailer Baugur, Iranian tycoon Robert Tchenguiz and the Livingstone brothers' London & Regional property group.

All three parties have registered interest in bidding and proposed prices of up to 210p per share. Somerfield wants further discussions before opening up its books.

Other private equity firms may come forward, now it has become clear that Somerfield is up for grabs.

Somerfield eased ¼p to 209¾p yesterday, valuing the group at £1.1bn. Confirmation that it was prepared to open the door to talks came after the market closed, but could give a fillip to the share price today.

Somerfield chairman John von Spreckelsen, 62, and chief executive Steve Back, 44, have been praised for instigating the turnaround in the supermarket's fortunes. Any bidder would be keen to keep them on.

Somerfield has a 5.4% share of the grocery sector, trailing behind Tesco, Asda, Sainsbury and Morrison.

Baugur already owns 5% of Somerfield shares, bought at a much lower price. It also owns supermarket chain Iceland and cash-and-carry business Booker, so the deal would enable it to save money from bulk buying.

Tchenguiz, who is in a consortium with Apax and Barclays Capital, has his eye on the property portfolio, which could be worth over £1bn.

Ian and Richard Livingstone, who have secured debt backing from Nomura, also have their eye on the firm's property assets.

Though retailers are struggling as consumers cut spending, supermarkets can benefit from an economic slowdown as, for instance, more people eat at home rather than at a restaurant.