'Somerfield bidders over key hurdle'

Two groups vying for control of UK supermarket chain Somerfield have overcome a key hurdle as they prepare bids worth £1bn (€1.46bn) plus, it was reported today.

The two consortiums could now launch formal offers for the business within weeks after reportedly reaching agreement with the Pensions Regulator on security for the retailer’s pensions scheme.

Somerfield is being circled by two groups – one featuring Apax Partners, Barclays Capital and property tycoon Robert Tchenguiz, and the other involving Japanese bank Nomura and property group London Regional.

The Financial Times revealed that sources believed the pensions agreement represented the last significant hurdle for the two groups.

It is thought the bidders agreed terms with the regulator and Somerfield’s pension fund trustees that they would pay down the company’s £112.3m (€1.63) pension deficit on an accelerated schedule.

Today’s report also understood that the regulator had been keenly involved in the process and declined to give clearance for an initial agreement between the group’s pension fund trustees and the bidders.

The Pensions Act, which came into force in April, requires the regulator to minimise the chance of a company becoming insolvent without sufficient assets in its pension scheme to pay all promised benefits.

Analysts expect an offer for the FTSE 250 Index company at a level of around £1.1bn (€1.61bn).

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

Baugur kicked off interest in the chain, which has 1,300 stores under the Somerfield and KwikSave brands, when it had a £1bn (€1.46bn)approach rejected in February.

Last week a section of shareholders urged the company’s board to walk away from a bid rather than accept a cut-price offer.