Supermarket Takeover

The Co-operative Group has agreed a £1.56 billion takeover of rival Somerfield, cementing the group's position as the UK's fifth biggest food retailer.

The deal will generate sales of about £8 billion and give the supermarket chain a market share of approximately 8%. It will also have more than 3,000 outlets.

Co-op chief executive Peter Marks said that the acquisition would provide "rocket fuel" for the group's growth plans.

Mr Marks said the deal, which is subject to regulatory approval, would be good news for consumers and for competition in the grocery market.

"We will create a stronger fifth player in food and a convenience store chain with unrivalled geographic reach," he said.

The Co-op, which is a mutual company owned by 2.5 million members, unveiled a three-year plan in April to double profits and invest £1.5 billion in transforming its retail estate.

As well as currently being the UK's fifth largest food retailer, it is the third largest pharmaceuticals chain, the biggest provider of funeral services and the largest independent travel business in the country.

Somerfield comprises 880 outlets across the UK and generated net sales of £4.2 billion in the year to April, with underlying earnings of £233 million.

Its owners, a consortium including property tycoon Robert Tchenguiz, private equity firm Apax and investment bank Barclays Capital, have been looking for a buyer for some time, although they were reported to be looking for a price of £2.5 billion.

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