The Co-operative Group today confirmed that it has entered into an agreement to acquire Somerfield for £1.565 billion, in a move that will act as “rocket fuel” for its three-year growth plan.
The combined food business will operate more than 3,000 grocery stores and generate net sales of about £8bn, making it a market leader in convenience food retailing and the fifth-largest food retailer in the UK, with a market share of approximately eight per cent.
The announcement comes after mounting press speculation this week.
Somerfield operates approximately 880 local grocery retail outlets across the UK. In the year to April 2008, the retailer generated net sales of £4.2bn, and earnings before interest, tax and depreciation of £233 million. At the end of the year, net assets totalled £1.3bn.
Peter Marks, chief executive of The Co-operative Group, said: “This is good news for consumers and for competition in the grocery market, where we will create a stronger fifth player in food and a convenience store chain with unrivalled geographic reach.
“For The Co-operative Group, this is a transformational deal - cementing our position as the UK’s premier community retailer and helping us significantly as we lead a renaissance of the Co-operative brand. Together, The Co-operative and Somerfield colleagues will be better placed than ever before to provide consumers with great choice, value and service.
“The acquisition of Somerfield will provide the rocket fuel for our three-year growth plan, outlined in April of this year. Under this plan, we are revitalising our retail estate under a single unified brand - modernising our stores, improving our product offer and service levels for customers and members and reinforcing our Co-operative difference.”
He insisted there was a “strong strategic fit” between the two businesses, with both “focused on the highly competitive top-up and convenience shopping market”.
But he admitted there could be some local competition issues, though he said he was confident they could be worked through with the Office of Fair Trading.
Paul Mason, chief executive of Somerfield, added: “The Co-operative Group and Somerfield have a similar focus in terms of customers, store types, product ranges and business vision. Our shared vision of providing a high-quality and affordable convenience offer to local communities means that, together, we will be twice as strong and therefore twice as able to deliver the local grocery shops British customers demand.
“Over the last two years we have transformed every aspect of Somerfield; a significant achievement and, as a result, we are now trading from a position of strength.
“With Somerfield and The Co-operative Group as one business, we believe that we can learn from each others strengths to ensure we continue to develop the best local grocery shops in Britain.”
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