Somerfield urged to reject cut-price offer

Takeover target Somerfield was today urged by shareholders to walk away from a bid rather than accept a cut-price offer.

The comments in the Financial Times came as hopes began to fade that the supermarket group will be the subject of an “aggressive” two-way bid battle.

The company has been in the takeover frame for most of the year and is still in talks with two parties – one featuring Apax Partners, Barclays Capital and property tycoon Robert Tchenguiz, and the other involving Japanese bank Nomura and property group London Regional.

Analysts now expect an offer below 220p a share – valuing the FTSE 250 Index company at under £1.2bn (€1.8bn).

Mark Webster, of State Street Global Advisors, which owns about 3% of Somerfield, said he would have to “consider the merits” of a bid below 220p.

He added: “It looks unlikely that the highest consensus expectation will be met but I am happy to back management in this case and would prefer them to walk away rather than sell the company too cheaply.”

Another shareholder told the FT that it was unlikely that management was being distracted by the takeover saga.

The source added: “If the bidders go away or a sensible offer is not made we are confident that management will continue to improve and grow the business.”

The process has taken longer than expected after talks were delayed by the withdrawal of Baugur, the Icelandic investment group, from the Apax-led consortium.

Paul Smiddy, an analyst at Robert W Baird, said last week that the lack of a bid “may indicate a further notch down in the eventual offer”.

He added: “We now believe that it is unlikely that an aggressive two-way battle for the company will be fought.”

The retailer, which operates 1,300 stores under the Somerfield and Kwik Save brands, rejected a £1bn (€1.5bn) takeover offer from Baugur in February.