Co-op confirms talks with Somerfield

The chief executive of UK supermarket chain The Co-operative Group has confirmed it is in talks with rival supermarket business Somerfield.

“We are in discussions with Somerfield, we’re very interested in buying the business. It makes financial sense and operational sense, it’s a great strategic fit for us,” CEO Peter Marks said before cautioning that talks were at an early-stage and completion of the deal was by no means a certainty.

Co-op does not know whether it is the only buyer talking to Somerfield’s vendors – Apax Partners, Barclays Capital, Kaupthing Bank, property entrepreneur Robert Tchenguiz and management.

Somerfield’s pricetag is not known but rumour suggests it is between £1.6bn and £1.7bn (US$3.2bn to US$3.3bn). The suggested figures are significantly below reported vendor expectations of £2bn to £2.5bn (US$3.9bn to US$4.9bn) at the beginning of the sale process.

According to reports, Co-op has lined up Lloyds TSB, Barclays, and Royal Bank of Scotland to provided debt to support the acquisition.

Somerfield was delisted by the current owners from the London Stock Exchange for £1.1bn (US$2bn) in 2005.