Co-op agrees Somerfield takeover

Co-op agrees Somerfield takeover

The Co-op hailed its return to the big league of food retailing thanks to a £1.6 billion takeover of rival Somerfield.

The deal - the biggest in its history - cements the Co-op's position as the UK's fifth biggest food retailer, creating a chain of more than 3,000 outlets with a market share of 8%.

Retail giant Tesco currently leads the way with 31% of the UK's £120 billion grocery market, followed by Asda and Sainsbury's with around 16% and Morrisons which has more than 11%.

Co-op chief executive Peter Marks said the Somerfield acquisition, which is subject to regulatory approval, meant "people should now be referring to the 'big five' retailers" rather than the big four above. It provided "rocket fuel" for the group's growth plans and was good news for consumers, he added.

Mr Marks said convenience stores were already winning customers from their bigger out-of-town rivals thanks to higher fuel costs persuading more people to shop locally.

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

"In terms of the convenience market, it has been been growing at a faster rate than the grocery market itself. People are concerned about time, but also about the cost of fuel.

"When they are making a decision 'do I drive five miles to a superstore or do I go down the bottom of the road and visit my local Co-op', that's affecting their decision making."

Somerfield, which is owned by a consortium including property tycoon Robert Tchenguiz, private equity firm Apax and investment bank Barclays Capital, has around 880 stores and generated £4.2 billion of net sales in the year to April.

Its owners were reported at the weekend to be looking for a price of £2.5 billion.