ASDA eyes up Somerfield

ASDA HAS reportedly set its sights on supermarket chain Somerfield, and has appointed bankers Lazard to advise on a potential bid.

The Walmart-owned supermarket giant joins a host of other suitors, lead by Icelandic retail group Baugur and private equity firm Apax Partners, who have valued the chain at over £1bn.

After an unsuccessful offer at the beginning of the year, the Baugur-Apax consortium has upped its bid to £1.12bn.

Somerfield’s board has so far put off considering the new offer in the hope of attracting further interest.

Last year, Asda was the UK’s third largest food retailer by market share with 11.9% of the market, while Somerfield was in fifth place with just over 4% of till receipts.

Robin Tapper, NFU’s head of food and farming, warned the deal could be bad news for farmers.

“Any reduction in choice for either consumers or suppliers isn’t helpful. We advocate the maximum number of outlets to give the best deal for both.”

But Andrea Cockram, a retail analyst with Verdict Research, said a tie-up between the two stores may not raise competition problems.

“The OFT split off convenience from supermarket retailing, and from that perspective there are no concerns, because Asda has no convenience stores at present.”

She also questioned Asda’s interest in the chain, saying it could be panic move to claw back ground lost to competitors.

“If they are seriously considering a move into convenience retailing, then it’s not clear why they didn’t express an interest a few years ago when it was patently obvious that Tesco and Sainsbury’s were increasing their presence in that sector.”

The most likely outcome of a successful bid would be cherry-picking of the best stores to generate growth for Asda, she added.