Co-op Told To Increase Bid For Somerfield Deal

Mon, 07 Apr 2008

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The owners of supermarket chain Somerfield have insisted that the Co-operative Group will have to raise its offer to buy the company after placing a price tag of between £2 billion and £2.5 billion on the 900-store chain.

The Co-op's provisional first-round bid is believed to have been below Somerfield’s value, with a source close to Somerfield saying that the Co-op "has not come up with a suitable price".

The Co-op’s move to acquire Somerfield could now be investigated by the Office of Fair Trading (OFT).

A successful bid would increase Co-op's grocery market share to around 8 per cent. The group currently holds a 4.4 per cent share of the UK grocery market, while Somerfield has a 3.6 per cent share.

But Paul Langston, CACI associate director of location strategy, believes that for any bid to be successful, the Co-op would have to dispose of roughly 37 stores on competition grounds.

Langston also said that Tesco could get acquire far more Somerfield stores than most industry experts believe, based on a relative low concentration of both retailers in some areas.

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