Apax, Barclays complete £1.6bn Somerfield exit

The UK supermarket chain Somefield has been sold to fellow supermarket operator Co-Operative Group just three years after it was acquired by an Apax- and Barclays-led consortium for £1.8 billion. The deal was announced in July but has taken 6 months to complete.

A consortium of private investors led by Apax Partners and Barclays Capital has completed the £1.6 billion (€1.8 billion; $2.2 billion) sale of supermarket giant Somerfield six months after its acquisition by the supermarket chain Co-operative Group (Co-Op) was first announced.

“The Somerfield sale process was delayed during the last six months due to the difficulties faced by the retail sector. This is because the parties involved in the process had their own problems to deal with,” a source familiar with the situation said.

Somerfield: 940 stores

The Somerfield chain, which is the sixth largest grocery retailer in the UK with 940 shops, was acquired by Apax, Barclays, the Tchenguiz Family Trust, Kaupthing Bank and management for £1.8 billion in 2005.

Although the exit price was £200 million less than what was originally paid for it, Apax said in a statement that it was a “successful exit for the consortium”.  Nearly half of the debt the consortium used to acquire Somerfield had been repaid at the time of the acquisition, according to Apax, and the balance sheets were restored upon acquisition by Co-Op.

The consortium shelved a €1 billion refinancing plan in August 2007, according to reports at the time. Since taking control of Somerfield, the private equity consortium installed new management and refocused the firm’s brand as a small scale local grocer. Somerfield gained a 3.7 percent sales increase over Christmas and a like-for-like sales growth of 5.5 percent in the eight months to January 2009.

This represents a good example of how private ownership can breathe new life into a business that is lacking strategic direction.

Alex Fortescue, Apax partner

This represents a good example of how private ownership can breathe new life into a business that is lacking strategic direction,” Alex Fortescue, a partner at Apax, said in a statement.

The consortium put Somerfield up for auction in January 2008, hoping to raise between £2 billion and £2.5 billion, after receiving unsolicited approaches from buyers in December 2007. UK supermarkets Asda, WM Morrison, Sainsbury’s and Tesco were rumoured to be among the bidders.

Co-Op, which is the world’s largest consumer-owned business, had its offer of £1.6 billion accepted in July last year. It now has more than 3,000 stores worldwide, and today announced the sale of 24 of its stores to Sainsbury’s, the UK’s third-biggest supermarket group, for £83 million pounds. Of the stores sold, 22 were Somerfield and two were Co-Op.