Apax, Barclays sell Somerfield for £1.6bn

The UK's Somerfield supermarket chain, acquired for £1.8bn in 2005 by an Apax- and Barclays-led consortium, has been sold on a cash-free, debt-free basis. The sale reportedly resulted in a 2x exit for the syndicate.

Somerfield, a UK supermarket chain with approximately 880  stores, has been acquired by the UK-based grocery operation the Co-operative Group from a consortium led by Apax Partners and Barclays Capital for £1.6 billion ($3.2 billion, €2 billion).

The private equity consortium acquired the company in November 2005 for £1.8 billion. It reportedly shelved a £1 billion refinancing in August after the problems in the credit markets rendered rapid recapitalisations a bull market phenomenon. According to reports the consortium has made a 2x profit from the sale.

In January, the syndicate of European buyout firm Apax and investment bank Barclays, as well as UK billionaire Robert Tchenguiz, came up with a plan to sell the supermarket chain for £2 billion to £2.5 billion after receiving unsolicited approaches in December, a source close to the syndicate told PrivateEquityOnline.

UK supermarkets Asda, WM Morrison, J Sainsbury and Tesco were thought to be considering bids, however as rising food costs, slumping consumer confidence, and the credit crunch made potential buyers skittish, the offers reportedly came in well below the asking price. Co-op was the only suitor to publicly identify itself.

The Co-operative Group is the world's largest consumer-owned business, with 85,000 employees across all its businesses. Regional and local retail societies are corporate members of the group. When the two food businesses are combined, they will operate more than 3,000 grocery stores and generate net sales of about £8 billion, Somerfield estimates, making it the fifth largest food retailer in the UK with a market share of approximately 8 percent.