Somerfield 'set to take on the big boys'

One of the backers of a £1.1bn (€1.6bn) takeover of Somerfield today pledged to “throw a lot more money” at the chain as it looks to take on bigger rivals.

Robert Tchenguiz, the property tycoon at the helm of a consortium poised to take control of the group, said he was confident Somerfield would be competitive and able to accelerate the turnaround strategy of its current management.

It is expected Violet Acquisitions, which also comprises private equity firm Apax Partners and Barclays Capital, will invest almost £300m (€440m) in improving the retailer’s ranges and stores over the next two years.

Prices may also be slashed as Violet sacrifices profits in favour of building market share at the UK’s fifth biggest supermarket group.

Mr Tchenguiz said in the Sunday Telegraph: “The company has done fantastically and has a good strategy. We are just going to throw a lot more money at it to accelerate it.

“We have gone into this knowing that the market is very competitive. We are competing with the big boys. We will compete. We are not scared of competition.”

Details of the strategy emerged after Somerfield’s board backed an offer of 197p a share – worth £1.08bn (€1.57bn) – on Friday. The offer price, which is below the 205p indicated earlier in the long-running takeover process, will be put before shareholders at the end of November.

A counter-bid may yet emerge, with the Business newspaper reporting that property company London & Regional will decide this week whether to make a counter bid – a fortnight after pulling out of talks with the Somerfield board.

If the Violet consortium is successful it will appoint Debenhams chairman John Lovering to the same post at Somerfield, whilst retaining the services of Steve Back as chief executive.

Mr Bck said: “For the management team this is a tremendous opportunity. Our staff, management and suppliers now have certainty and we can continue to deliver the strategy we have commenced and look forward to the next stages of its development.”

A dramatic overhaul of the Bristol-based company’s store portfolio was rewarded in July with a rise in annual profits of 63%, although the retailer has continued to face tough trading conditions.

The group recently reported like-for-like sales growth of 0.3% for its Somerfield stores during the 16 weeks to August 20, but sales overall were 1.8% lower due to weakness at its Kwik Save brand.

A member of the consortium indicated to the Sunday Telegraph that the Kwik Save brand could be sold if enough interest is expressed in it.

Somerfield has around 1,300 shops in the UK, including almost 500 under the Kwik Save brand.