Somerfield
Encyclopedia
Somerfield was a chain of small to medium sized supermarkets operating in the United Kingdom. The company was taken over by the Co-operative Group
on 2 March 2009 in a £1.57 billion deal, creating the UK's fifth largest food retailer. The name is currently being phased out and replaced by the Co-operative Food brand in a rolling programme of store conversions. The Somerfield brand was phased out by Spring 2011.
Operating as Somerfield Stores Ltd, the Bristol
based company emerged from the former Gateway chain in the 1990s and also previously owned the now defunct Kwik Save
chain of discount food stores.
-based grocer
known as J H Mills which was founded in 1875 and which developed a self service supermarket chain named Gateway Foodmarkets in 1950. Gateway Foodmarkets was taken over by the Linfood Holdings, which already owned the Frank Dee wholesaler business and a chain of 70 supermarkets, in 1977. In 1983 Linfood Holdings was renamed the Dee Corporation.
, Chief Executive at the Dee Corporation, having escaped a takeover bid from Argyll Foods
in 1981, decided to create his own supermarket empire. Two of the biggest acquisitions were of International Stores, bought from British American Tobacco
in 1984, and Fine Fare
, bought from Associated British Foods
in the following year. By this time the Dee Corporation had over 1,100 stores, and it had nearly 12% of the market, not far behind Sainsbury's and Tesco
. Most of the Dee Corporation’s outlets were small, high-street stores. Monk argued that there was a future for well-run conventional supermarkets as well as the large out-of-town stores.
However, by 1987 the Dee Corporation ran into problems, mainly because of the difficulty of integrating so many disparate businesses. Some disposals were made in that year, including the Linfood wholesaling operation. In 1988, the Dee Corporation changed its name to the Gateway Corporation, and a new retailing chief was recruited from the US. Investors remained sceptical, and in 1989 the Company was the subject of a £2bn takeover bid from a newly formed company, Isosceles; the deal was partly financed by a pre arranged sale of ninety Gateway stores to Asda
.
Gateway also took over some of the former Carrefour
hypermarkets when the French
retailer exited Britain in the late 1980s, notably the store at the Merry Hill Shopping Centre
in the West Midlands
in 1988 - although this lasted just two years before the store was sold on to Asda
.
Some of the planned disposals of non-core businesses took longer than expected to complete. Financial strains led to the enforced departure of David Smith and other executives in 1991.
, and the company then built its success upon the new brand alongside the existing Gateway and Food Giant chains. A small number of stores were also relaunched under a new Food Giant discount brand, with the first store opening in Nottingham
in 1991.
Two years later, yet another chief executive, David Simons, was in command. In May 1994 the Company changed its name to Somerfield plc.
According to The Guardian, the holding company almost collapsed in the 1990s under a “mountain of debt”. In 1996, Somerfield plc was floated on the stock market in an initial public offering
, after the recovery had reached the point where flotation became feasible with a market value of around £600m, and the proceeds were used to repay banks that had lent to Isosceles. At the time of the flotation the company’s market share had fallen to 5.3%, its lowest level for two years, but Simons claimed that the company was now clearly positioned in the market, and that the business would benefit from what he saw as the trend back towards high-street shopping. The aim was to become the UK’s strongest neighbourhood food retailer.
Questions remained about whether, at a time of intense competition both from discounters and from the bigger chains, Somerfield could generate adequate growth in sales and profits.
In 1998 the company took over the rival Kwik Save
in a £473 million transaction: although the deal was billed as a merger, Somerfield investors owned 62.5% of the enlarged group.
Observers questioned whether putting together two very different businesses would solve either’s problems. The initial plan was to convert most of the Kwik Save stores to the Somerfield name, but the group continued to suffer from a disparate store portfolio, the result of numerous ill digested acquisitions. At the end of 1999 Simons, facing strong criticism from the City, announced plans to sell a third of the company’s 1,400 stores. He admitted that the group had underestimated the difference between Somerfield and Kwik Save, and had failed to support and maintain the Kwik-Save brand.
Kwik Save had over-expanded with a badly focused portfolio of stores, many in poorer areas, and the company was in a worse state than Somerfield's management had realised.
The original plan was to transfer all Kwik Save stores to the Somerfield fascia, but it quickly became clear that many outlets were not suitable for conversion, either due to size or location. Also, the downmarket wooden shelving and poor quality fittings used by Kwik Save meant that every conversion required a full refurbishment of the store - simply changing the signage and uniforms would have risked dragging the carefully developed Somerfield brand downmarket. Instead, the larger Kwik Save stores were converted, some were sold or closed and the chain became a trading division of Somerfield Stores Ltd, sharing its supply chain and back office systems with Somerfield. For some years, the own brand products in Kwik Save stores were Somerfield, although this policy was reversed once it was decided to keep the brand.
It was clear that more than a hundred Somerfield and Kwik-Save stores were within a mile of each of each other and directly competing: also customers were switching from high street to out of town shopping.
, the convenience food retailer, was brought in as chairman. The new strategy was to keep Somerfield and Kwik Save as separate businesses, while sharing common services in such areas as information technology and corporate finance. By mid-2002 – half way through what was seen as a five year recovery programme – the company announced a return to the black, and dividends were resumed after a two year break, although the positioning issues remained unsolved.
Somerfield was the product of opportunistic acquisitions, driven more by financial engineering than by any conception of where the company should be positioned. The focus on medium sized High Street supermarkets was largely a matter of making the best of a very difficult job; the main problem, which had not been solved by the end of the 1980s, was to make some sense of the heterogeneous collection of stores which it had acquired through its numerous takeovers.
In October 2004, Somerfield acquired 114 Safeway Compact
stores from Morrisons
, which were subsequently re branded under the Somerfield name. This deal was referred to the Competition Commission
. After completing its investigation, the Commission instructed Somerfield to sell twelve stores. In September 2005, Somerfield announced its intention to appeal against the decision, a process delayed by a takeover bid for the chain. The Competition Appeal Tribunal upheld the Commission's decision in February 2006. Somerfield therefore had to proceed with sale of the twelve stores. However, the sale of Kwik Save
in February 2006 is likely to have removed the potential clashes between some of the offending stores.
ic venture capital
group Baugur made an approach, while United Co-operatives
and London & Regional Properties
also expressed an interest, but both groups dropped out of the running.
Then on 21 December 2005 Somerfield plc was acquired by a consortium consisting of Apax Partners
, Barclays Capital
and the Tchenguiz Family Trust
, at which time the name of the group changed to Somerfield Ltd.
The aim of the new owners was to simplify the business and attract new customers. The first move was the end of the SaverCard loyalty scheme in May 2006 with promotional deals becoming available to all customers. A new point of sale was introduced to make promotions and price cuts more visible to customers. Somerfield's three own-label brands have also been overhauled; the budget 'Makes Sense' range has become 'Simply Value', the low calories 'Good Intentions' range has become 'Healthy Choice', and the premium 'So Good' range has become 'Best Ever!'.
In 2005, Somerfield closed 22 of its 51 Scottish Kwik Save stores and re-branded the remainder under its own name, thus removing the Kwik Save brand from the marketplace north of the border.
After the group was taken over, it was reported that the new owners found the Kwik Save
chain was losing £40m per year, effectively cancelling out around 40% of the profits generated by the Somerfield division. As a result, it sped up the conversion of stores from Kwik Save to Somerfield. On 27 February 2006, Somerfield Stores Ltd sold the Kwik Save brand and 171 stores to BTTF, an investment vehicle headed by Paul Niklas, for an undisclosed sum. Somerfield re-branded the 102 Kwik Save sites it had retained under its own name and a further 77 stores were sold to other retailers, thought to include Netto
and Aldi
, leaving the company to focus solely on the Somerfield brand.
Subsequent to the initial sale, a further 19 Kwik Save stores were acquired by BTTF, including some of those included in the Competition Commission
investigation ruling into the Safeway Compact
takeover.
Some stores were sold to other groups, including Sainsbury's, which bought 5 stores, while others were closed completely.
Having bought 140 Texaco
petrol stations in 2007, Somerfield tripled the size of some of their shops, using a similar format to its convenience stores. Signage was replaced with the Somerfield brand.
In October 2006, it was revealed that 40 Somerfield stores, including many retained Kwik Save branches, had been sold. These stores were mainly under-performing converted Kwik Save stores.
In November 2006, the company also sold a further 12 stores to Marks & Spencer
to trade under the M&S Simply Food brand. This deal included stores in Blackheath in S.E. London
, Broughty Ferry
in Dundee
, and Petersfield
and Alton
in Hampshire
.
.
The build-up to this announcement began in late 2007, when the parent private equity consortium, that had acquired Somerfield in December 2005, put the chain up for sale. News reports valued the chain at over £1.5 billion.
Somerfield appointed Citigroup
to manage the sale, and a preference to sell as a going concern rather than on a piecemeal basis was reported. It emerged that four provisional bids were made. Only the Co-operative Group
, the UK's largest co-operative, publicly announced purchase talks, aiming to complete due diligence
for the entire estate of 900 Somerfield stores in the third quarter, but would be expected to sell a minority of stores. On 24 June, a Thomson Reuters
newswire reported sources indicating that the Co-operative Group's acquisition of Somerfield could be finalised at the start of July, in a final deal worth £1.7 billion. Earlier in June, Morrisons
confirmed that it was not bidding for Somerfield, but would consider the purchase of any stores that are sold after the acquisition. Newspaper sources said that other major supermarket chains are also interested in such purchases. In July 2008, the Co-operative Group
announced a deal to purchase Somerfield for £1.57 billion, creating the fifth largest supermarket chain in the UK. It was confirmed on 20 October 2008 that the Office of Fair Trading had approved the sale of Somerfield under the condition that 133 stores must be sold. This process is underway as of June 2009 with many stores changing ownership, for example to Lidl
.
In February 2009, it was announced that The Co-operative Group
plan to close the Somerfield head office in Bristol and relocate all operations to their existing head office in Manchester
. The Co-operative have said that they will try to relocate as many staff as possible to other areas of the business or to their head office in Manchester
, to try to avoid redundancies. The takeover was officially completed on 2 March 2009. The process is underway as of June 2009 of closing/selling the additional stores and re-branding the remaining Somerfield stores.
The five larger retailers (in descending order of size) were Tesco
, Asda
, Sainsbury's, Morrisons
and The Co-operative Group
. The top four have specialities in larger superstores, while the Co-op has become the largest community retailer, with specialities in convenience stores and smaller supermarket
s. At one point in early 2007, Somerfield was also briefly surpassed in size by Waitrose
, and the independent grocers' distributor, Nisa-Today's, is comparable in size.
The Co-operative Group
The Co-operative Group Ltd. is a United Kingdom consumer cooperative with a diverse range of business interests. It is co-operatively run and owned by its members. It is the largest organisation of this type in the world, with over 5.5 million members, who all have a say in how the business is...
on 2 March 2009 in a £1.57 billion deal, creating the UK's fifth largest food retailer. The name is currently being phased out and replaced by the Co-operative Food brand in a rolling programme of store conversions. The Somerfield brand was phased out by Spring 2011.
Operating as Somerfield Stores Ltd, the Bristol
Bristol
Bristol is a city, unitary authority area and ceremonial county in South West England, with an estimated population of 433,100 for the unitary authority in 2009, and a surrounding Larger Urban Zone with an estimated 1,070,000 residents in 2007...
based company emerged from the former Gateway chain in the 1990s and also previously owned the now defunct Kwik Save
Kwik Save
Kwik Save was a discount supermarket chain in the United Kingdom until 2007. Its stores were small to medium sized high street supermarkets, mainly located in areas with below average incomes...
chain of discount food stores.
History
The early years
The Company has its origins in a BristolBristol
Bristol is a city, unitary authority area and ceremonial county in South West England, with an estimated population of 433,100 for the unitary authority in 2009, and a surrounding Larger Urban Zone with an estimated 1,070,000 residents in 2007...
-based grocer
Grocer
A grocer is a bulk seller of food. Beginning as early as the 14th century, a grocer was a dealer in comestible dry goods such as spices, pepper, sugar, and cocoa, tea and coffee...
known as J H Mills which was founded in 1875 and which developed a self service supermarket chain named Gateway Foodmarkets in 1950. Gateway Foodmarkets was taken over by the Linfood Holdings, which already owned the Frank Dee wholesaler business and a chain of 70 supermarkets, in 1977. In 1983 Linfood Holdings was renamed the Dee Corporation.
Acquisitions
Alec MonkAlec Monk
David Alec George Monk , known as Alec Monk, is a British businessman who is a former chairman and chief executive of the supermarket chain Gateway and former chairman of the brewing company Charles Wells Ltd.-Life:...
, Chief Executive at the Dee Corporation, having escaped a takeover bid from Argyll Foods
Safeway (UK)
Safeway was a chain of supermarkets and convenience stores in the United Kingdom. It started as a subsidiary of the American Safeway Inc., before being sold off in 1987....
in 1981, decided to create his own supermarket empire. Two of the biggest acquisitions were of International Stores, bought from British American Tobacco
British American Tobacco
British American Tobacco p.l.c. is a global tobacco company headquartered in London, United Kingdom. It is the world’s second largest quoted tobacco company by global market share , with a leading position in more than 50 countries and a presence in more than 180 countries...
in 1984, and Fine Fare
Fine Fare
Fine Fare was the name of a chain of supermarkets in the United Kingdom. It was famous for its Yellow Pack budget own-label range.-History:The company started as a single supermarket in Brighton in 1956. It was one of a series of convenience store chains established in the 1950s, the others being...
, bought from Associated British Foods
Associated British Foods
Associated British Foods plc is a global food, ingredients and retail company headquartered in London, United Kingdom. Its ingredients division is the world's second largest producer of both sugar and baker's yeast and a major producer of other ingredients including emulsifiers, enzymes and lactose...
in the following year. By this time the Dee Corporation had over 1,100 stores, and it had nearly 12% of the market, not far behind Sainsbury's and Tesco
Tesco
Tesco plc is a global grocery and general merchandise retailer headquartered in Cheshunt, United Kingdom. It is the third-largest retailer in the world measured by revenues and the second-largest measured by profits...
. Most of the Dee Corporation’s outlets were small, high-street stores. Monk argued that there was a future for well-run conventional supermarkets as well as the large out-of-town stores.
However, by 1987 the Dee Corporation ran into problems, mainly because of the difficulty of integrating so many disparate businesses. Some disposals were made in that year, including the Linfood wholesaling operation. In 1988, the Dee Corporation changed its name to the Gateway Corporation, and a new retailing chief was recruited from the US. Investors remained sceptical, and in 1989 the Company was the subject of a £2bn takeover bid from a newly formed company, Isosceles; the deal was partly financed by a pre arranged sale of ninety Gateway stores to Asda
Asda
Asda Stores Ltd is a British supermarket chain which retails food, clothing, general merchandise, toys and financial services. It also has a mobile telephone network, , Asda Mobile...
.
Gateway also took over some of the former Carrefour
Carrefour
Carrefour S.A. is an international hypermarket chain headquartered in Levallois-Perret, France. It is one of the largest hypermarket chains in the world...
hypermarkets when the French
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
retailer exited Britain in the late 1980s, notably the store at the Merry Hill Shopping Centre
Merry Hill Shopping Centre
Westfield Merry Hill is a shopping centre in Brierley Hill near Dudley, West Midlands, England. It was developed between 1985 and 1990, with several expansion and renovation projects taking place since. The original developers and owners were Richardson Developments but the Centre has had a number...
in the West Midlands
West Midlands (county)
The West Midlands is a metropolitan county in western central England with a 2009 estimated population of 2,638,700. It came into existence as a metropolitan county in 1974 after the passage of the Local Government Act 1972, formed from parts of Staffordshire, Worcestershire and Warwickshire. The...
in 1988 - although this lasted just two years before the store was sold on to Asda
Asda
Asda Stores Ltd is a British supermarket chain which retails food, clothing, general merchandise, toys and financial services. It also has a mobile telephone network, , Asda Mobile...
.
Isosceles era
When Isosceles, a newly created financial group led by David Smith and backed by several big investing institutions, bid successfully for Gateway in 1989 and took the company private, the plan was to restructure the business and refocus it on what were called “middle ground” outlets, falling between the larger out of town superstores and smaller, inner city neighbourhood shops; the average size of the stores was between 5000 sq ft (464.5 m²) and 10000 sq ft (929 m²). The promoters of the Isosceles bid believed that, after this disposal and extensive restructuring of the rest of the portfolio, Gateway could become a viable competitor; the intention was to re-float the company on the stock market within three to five years. However, the bid was highly leveraged, and it was not clear that the new company would be able to fund the necessary modernisation of the business.Some of the planned disposals of non-core businesses took longer than expected to complete. Financial strains led to the enforced departure of David Smith and other executives in 1991.
Introduction of Somerfield
In the following year, a new chief executive, Bob Willett, was appointed and a decision was taken to rebrand the company's operations as Somerfield after a successful pilot scheme in 1990 with a new store and the first Somerfield store in the country being built in Burnham on Sea, SomersetSomerset
The ceremonial and non-metropolitan county of Somerset in South West England borders Bristol and Gloucestershire to the north, Wiltshire to the east, Dorset to the south-east, and Devon to the south-west. It is partly bounded to the north and west by the Bristol Channel and the estuary of the...
, and the company then built its success upon the new brand alongside the existing Gateway and Food Giant chains. A small number of stores were also relaunched under a new Food Giant discount brand, with the first store opening in Nottingham
Nottingham
Nottingham is a city and unitary authority in the East Midlands of England. It is located in the ceremonial county of Nottinghamshire and represents one of eight members of the English Core Cities Group...
in 1991.
Two years later, yet another chief executive, David Simons, was in command. In May 1994 the Company changed its name to Somerfield plc.
According to The Guardian, the holding company almost collapsed in the 1990s under a “mountain of debt”. In 1996, Somerfield plc was floated on the stock market in an initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
, after the recovery had reached the point where flotation became feasible with a market value of around £600m, and the proceeds were used to repay banks that had lent to Isosceles. At the time of the flotation the company’s market share had fallen to 5.3%, its lowest level for two years, but Simons claimed that the company was now clearly positioned in the market, and that the business would benefit from what he saw as the trend back towards high-street shopping. The aim was to become the UK’s strongest neighbourhood food retailer.
Questions remained about whether, at a time of intense competition both from discounters and from the bigger chains, Somerfield could generate adequate growth in sales and profits.
Kwik Save purchase
In 1998 the company took over the rival Kwik Save
Kwik Save
Kwik Save was a discount supermarket chain in the United Kingdom until 2007. Its stores were small to medium sized high street supermarkets, mainly located in areas with below average incomes...
in a £473 million transaction: although the deal was billed as a merger, Somerfield investors owned 62.5% of the enlarged group.
Observers questioned whether putting together two very different businesses would solve either’s problems. The initial plan was to convert most of the Kwik Save stores to the Somerfield name, but the group continued to suffer from a disparate store portfolio, the result of numerous ill digested acquisitions. At the end of 1999 Simons, facing strong criticism from the City, announced plans to sell a third of the company’s 1,400 stores. He admitted that the group had underestimated the difference between Somerfield and Kwik Save, and had failed to support and maintain the Kwik-Save brand.
Kwik Save had over-expanded with a badly focused portfolio of stores, many in poorer areas, and the company was in a worse state than Somerfield's management had realised.
The original plan was to transfer all Kwik Save stores to the Somerfield fascia, but it quickly became clear that many outlets were not suitable for conversion, either due to size or location. Also, the downmarket wooden shelving and poor quality fittings used by Kwik Save meant that every conversion required a full refurbishment of the store - simply changing the signage and uniforms would have risked dragging the carefully developed Somerfield brand downmarket. Instead, the larger Kwik Save stores were converted, some were sold or closed and the chain became a trading division of Somerfield Stores Ltd, sharing its supply chain and back office systems with Somerfield. For some years, the own brand products in Kwik Save stores were Somerfield, although this policy was reversed once it was decided to keep the brand.
It was clear that more than a hundred Somerfield and Kwik-Save stores were within a mile of each of each other and directly competing: also customers were switching from high street to out of town shopping.
John von Spreckelsen
A few months later Simons resigned, and John von Spreckelsen, formerly chief executive of BudgensBudgens
Budgens Stores Ltd is a chain of foodstores in the United Kingdom. It was founded in 1872 by John Budgen, who opened the first store at Maidenhead, Berkshire. Budgens supermarket chain operates over 227 stores and employs over 6,000 staff...
, the convenience food retailer, was brought in as chairman. The new strategy was to keep Somerfield and Kwik Save as separate businesses, while sharing common services in such areas as information technology and corporate finance. By mid-2002 – half way through what was seen as a five year recovery programme – the company announced a return to the black, and dividends were resumed after a two year break, although the positioning issues remained unsolved.
Somerfield was the product of opportunistic acquisitions, driven more by financial engineering than by any conception of where the company should be positioned. The focus on medium sized High Street supermarkets was largely a matter of making the best of a very difficult job; the main problem, which had not been solved by the end of the 1980s, was to make some sense of the heterogeneous collection of stores which it had acquired through its numerous takeovers.
New formats
Somerfield changed its logo from a rectangular shape to a more contemporary design and opened a number of store formats, including Somerfield Essentials and Somerfield Market Fresh. It further changed its brand image by introducing newer own-brand lines changing 'So Good' to 'Best Ever...', 'Good Intentions' to 'Healthy Choice', and a new advertising strapline: "Giving you what you want". A low-price own brand label called 'Makes Sense' was changed to 'Simply Value' (now used by The Co-operative Food) to compete with rival low cost brands, such as Tesco Value.Safeway Compact
In October 2004, Somerfield acquired 114 Safeway Compact
Safeway (UK)
Safeway was a chain of supermarkets and convenience stores in the United Kingdom. It started as a subsidiary of the American Safeway Inc., before being sold off in 1987....
stores from Morrisons
Morrisons
Wm Morrison Supermarkets plc is the fourth largest chain of supermarkets in the United Kingdom, headquartered in Bradford, West Yorkshire, England. The company is usually referred to and is branded as Morrisons formerly Morrison's, and it is part of the FTSE 100 Index of companies...
, which were subsequently re branded under the Somerfield name. This deal was referred to the Competition Commission
Competition Commission
The Competition Commission is a non-departmental public body responsible for investigating mergers, markets and other enquiries related to regulated industries under competition law in the United Kingdom...
. After completing its investigation, the Commission instructed Somerfield to sell twelve stores. In September 2005, Somerfield announced its intention to appeal against the decision, a process delayed by a takeover bid for the chain. The Competition Appeal Tribunal upheld the Commission's decision in February 2006. Somerfield therefore had to proceed with sale of the twelve stores. However, the sale of Kwik Save
Kwik Save
Kwik Save was a discount supermarket chain in the United Kingdom until 2007. Its stores were small to medium sized high street supermarkets, mainly located in areas with below average incomes...
in February 2006 is likely to have removed the potential clashes between some of the offending stores.
Acquired by private equity
Retail entrepreneurs John Lovering and Bob Mackenzie made two failed bids to take over the Company in 2003. Then in 2005, IcelandIceland
Iceland , described as the Republic of Iceland, is a Nordic and European island country in the North Atlantic Ocean, on the Mid-Atlantic Ridge. Iceland also refers to the main island of the country, which contains almost all the population and almost all the land area. The country has a population...
ic venture capital
Venture capital
Venture capital is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as...
group Baugur made an approach, while United Co-operatives
United Co-operatives
United Co-operatives Limited, or simply United Co-op, was the largest regional consumer co-operative in the United Kingdom until its merger with The Co-operative Group in 2007. The Society operated across Yorkshire, the north west and north Midlands of England...
and London & Regional Properties
London & Regional Properties
London & Regional Properties is a property company based in London, United Kingdom. It is one of the largest privately held property companies in Europe....
also expressed an interest, but both groups dropped out of the running.
Then on 21 December 2005 Somerfield plc was acquired by a consortium consisting of Apax Partners
Apax Partners
Apax Partners LLP is a global private equity and venture capital firm, headquartered in London. The company also operates out of eight other offices in New York, Hong Kong, Mumbai, Tel-Aviv, Madrid, Stockholm, Milan and Munich. The firm, including its various predecessors, have raised...
, Barclays Capital
Barclays Capital
Barclays Capital is a global British investment bank. It is the investment banking division of Barclays plc which has a balance sheet of over £1.2 trillion . Barclays Capital provides financing and risk management services to large companies, institutions and government clients. It is a primary...
and the Tchenguiz Family Trust
Robert Tchenguiz
Robert Tchenguiz, born 9 September 1960, and his older brother, Vincent Tchenguiz, are British businessmen.Vincent Tchenguiz, a British entrepreneur born in October 1956, is a native of Tehran. He hails from an Iraqi-Jewish background. His family left Iraq in 1948 and settled in Iran...
, at which time the name of the group changed to Somerfield Ltd.
The aim of the new owners was to simplify the business and attract new customers. The first move was the end of the SaverCard loyalty scheme in May 2006 with promotional deals becoming available to all customers. A new point of sale was introduced to make promotions and price cuts more visible to customers. Somerfield's three own-label brands have also been overhauled; the budget 'Makes Sense' range has become 'Simply Value', the low calories 'Good Intentions' range has become 'Healthy Choice', and the premium 'So Good' range has become 'Best Ever!'.
Kwik Save sale
In 2005, Somerfield closed 22 of its 51 Scottish Kwik Save stores and re-branded the remainder under its own name, thus removing the Kwik Save brand from the marketplace north of the border.
After the group was taken over, it was reported that the new owners found the Kwik Save
Kwik Save
Kwik Save was a discount supermarket chain in the United Kingdom until 2007. Its stores were small to medium sized high street supermarkets, mainly located in areas with below average incomes...
chain was losing £40m per year, effectively cancelling out around 40% of the profits generated by the Somerfield division. As a result, it sped up the conversion of stores from Kwik Save to Somerfield. On 27 February 2006, Somerfield Stores Ltd sold the Kwik Save brand and 171 stores to BTTF, an investment vehicle headed by Paul Niklas, for an undisclosed sum. Somerfield re-branded the 102 Kwik Save sites it had retained under its own name and a further 77 stores were sold to other retailers, thought to include Netto
Netto (store)
Netto is a Danish discount supermarket operating in several European countries. Netto is owned by Dansk Supermarked Group, which in turn is partly owned by A.P. Møller-Mærsk Group.Netto also operates an express version of the store, known as Døgn Netto...
and Aldi
ALDI
ALDI Einkauf GmbH & Co. oHG, doing business as ', short for "Albrecht Discount", is a discount supermarket chain based in Germany...
, leaving the company to focus solely on the Somerfield brand.
Subsequent to the initial sale, a further 19 Kwik Save stores were acquired by BTTF, including some of those included in the Competition Commission
Competition Commission
The Competition Commission is a non-departmental public body responsible for investigating mergers, markets and other enquiries related to regulated industries under competition law in the United Kingdom...
investigation ruling into the Safeway Compact
Safeway (UK)
Safeway was a chain of supermarkets and convenience stores in the United Kingdom. It started as a subsidiary of the American Safeway Inc., before being sold off in 1987....
takeover.
Store rationalisation
In August 2006 a series of store closures was announced as Somerfield's new owners continued their restructuring activity. Some of these were poorly performing Somerfield stores and some were former Kwik Save sites that had not proved successful after being converted to Somerfield stores in 2006.Some stores were sold to other groups, including Sainsbury's, which bought 5 stores, while others were closed completely.
Having bought 140 Texaco
Texaco
Texaco is the name of an American oil retail brand. Its flagship product is its fuel "Texaco with Techron". It also owns the Havoline motor oil brand....
petrol stations in 2007, Somerfield tripled the size of some of their shops, using a similar format to its convenience stores. Signage was replaced with the Somerfield brand.
In October 2006, it was revealed that 40 Somerfield stores, including many retained Kwik Save branches, had been sold. These stores were mainly under-performing converted Kwik Save stores.
In November 2006, the company also sold a further 12 stores to Marks & Spencer
Marks & Spencer
Marks and Spencer plc is a British retailer headquartered in the City of Westminster, London, with over 700 stores in the United Kingdom and over 300 stores spread across more than 40 countries. It specialises in the selling of clothing and luxury food products...
to trade under the M&S Simply Food brand. This deal included stores in Blackheath in S.E. London
Blackheath, London
Blackheath is a district of South London, England. It is named from the large open public grassland which separates it from Greenwich to the north and Lewisham to the west...
, Broughty Ferry
Broughty Ferry
Broughty Ferry is a suburb on the eastern side of the City of Dundee, on the shore of the Firth of Tay in eastern Scotland...
in Dundee
Dundee
Dundee is the fourth-largest city in Scotland and the 39th most populous settlement in the United Kingdom. It lies within the eastern central Lowlands on the north bank of the Firth of Tay, which feeds into the North Sea...
, and Petersfield
Petersfield, Hampshire
Petersfield is a market town and civil parish in the East Hampshire district of Hampshire, England. It is north of Portsmouth, on the A3 road. The town has its own railway station on the Portsmouth Direct Line, the mainline rail link connecting Portsmouth and London. The town is situated on the...
and Alton
Alton, Hampshire
Alton is a historic market town and civil parish in the East Hampshire district of the English county of Hampshire. It had a population of 16,584 at the 1991 census and is administered by East Hampshire district council. It is located on the source of the River Wey and is the highest town in...
in Hampshire
Hampshire
Hampshire is a county on the southern coast of England in the United Kingdom. The county town of Hampshire is Winchester, a historic cathedral city that was once the capital of England. Hampshire is notable for housing the original birthplaces of the Royal Navy, British Army, and Royal Air Force...
.
Takeover by the Co-operative Group
On 16 July 2008, it was announced that Somerfield would be acquired by the Co-operative Group for £1.57 billion, subject to approval from the Office of Fair TradingOffice of Fair Trading
The Office of Fair Trading is a not-for-profit and non-ministerial government department of the United Kingdom, established by the Fair Trading Act 1973, which enforces both consumer protection and competition law, acting as the UK's economic regulator...
.
The build-up to this announcement began in late 2007, when the parent private equity consortium, that had acquired Somerfield in December 2005, put the chain up for sale. News reports valued the chain at over £1.5 billion.
Somerfield appointed Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
to manage the sale, and a preference to sell as a going concern rather than on a piecemeal basis was reported. It emerged that four provisional bids were made. Only the Co-operative Group
The Co-operative Group
The Co-operative Group Ltd. is a United Kingdom consumer cooperative with a diverse range of business interests. It is co-operatively run and owned by its members. It is the largest organisation of this type in the world, with over 5.5 million members, who all have a say in how the business is...
, the UK's largest co-operative, publicly announced purchase talks, aiming to complete due diligence
Due diligence
"Due diligence" is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations...
for the entire estate of 900 Somerfield stores in the third quarter, but would be expected to sell a minority of stores. On 24 June, a Thomson Reuters
Thomson Reuters
Thomson Reuters Corporation is a provider of information for the world's businesses and professionals and is created by the Thomson Corporation's purchase of Reuters Group on 17 April 2008. Thomson Reuters is headquartered at 3 Times Square, New York City, USA...
newswire reported sources indicating that the Co-operative Group's acquisition of Somerfield could be finalised at the start of July, in a final deal worth £1.7 billion. Earlier in June, Morrisons
Morrisons
Wm Morrison Supermarkets plc is the fourth largest chain of supermarkets in the United Kingdom, headquartered in Bradford, West Yorkshire, England. The company is usually referred to and is branded as Morrisons formerly Morrison's, and it is part of the FTSE 100 Index of companies...
confirmed that it was not bidding for Somerfield, but would consider the purchase of any stores that are sold after the acquisition. Newspaper sources said that other major supermarket chains are also interested in such purchases. In July 2008, the Co-operative Group
The Co-operative Group
The Co-operative Group Ltd. is a United Kingdom consumer cooperative with a diverse range of business interests. It is co-operatively run and owned by its members. It is the largest organisation of this type in the world, with over 5.5 million members, who all have a say in how the business is...
announced a deal to purchase Somerfield for £1.57 billion, creating the fifth largest supermarket chain in the UK. It was confirmed on 20 October 2008 that the Office of Fair Trading had approved the sale of Somerfield under the condition that 133 stores must be sold. This process is underway as of June 2009 with many stores changing ownership, for example to Lidl
Lidl
Lidl is a discount supermarket chain based in Germany that operates over 7,200 stores across Europe. The company's full name is Lidl Stiftung & Co. KG...
.
In February 2009, it was announced that The Co-operative Group
The Co-operative Group
The Co-operative Group Ltd. is a United Kingdom consumer cooperative with a diverse range of business interests. It is co-operatively run and owned by its members. It is the largest organisation of this type in the world, with over 5.5 million members, who all have a say in how the business is...
plan to close the Somerfield head office in Bristol and relocate all operations to their existing head office in Manchester
Manchester
Manchester is a city and metropolitan borough in Greater Manchester, England. According to the Office for National Statistics, the 2010 mid-year population estimate for Manchester was 498,800. Manchester lies within one of the UK's largest metropolitan areas, the metropolitan county of Greater...
. The Co-operative have said that they will try to relocate as many staff as possible to other areas of the business or to their head office in Manchester
Manchester
Manchester is a city and metropolitan borough in Greater Manchester, England. According to the Office for National Statistics, the 2010 mid-year population estimate for Manchester was 498,800. Manchester lies within one of the UK's largest metropolitan areas, the metropolitan county of Greater...
, to try to avoid redundancies. The takeover was officially completed on 2 March 2009. The process is underway as of June 2009 of closing/selling the additional stores and re-branding the remaining Somerfield stores.
Operations
As an independent entity, Somerfield was the sixth largest food retailer in the UK, according to TNS Worldpanel, following the sale of the Kwik Save unit and the closure or sale of unprofitable stores, with 977 stores (as of January 2007). Also the fifth largest private company in the UK, Somerfield had a 3.8% share of the UK grocery market in 2007, down from 4.5% in 2006.The five larger retailers (in descending order of size) were Tesco
Tesco
Tesco plc is a global grocery and general merchandise retailer headquartered in Cheshunt, United Kingdom. It is the third-largest retailer in the world measured by revenues and the second-largest measured by profits...
, Asda
Asda
Asda Stores Ltd is a British supermarket chain which retails food, clothing, general merchandise, toys and financial services. It also has a mobile telephone network, , Asda Mobile...
, Sainsbury's, Morrisons
Morrisons
Wm Morrison Supermarkets plc is the fourth largest chain of supermarkets in the United Kingdom, headquartered in Bradford, West Yorkshire, England. The company is usually referred to and is branded as Morrisons formerly Morrison's, and it is part of the FTSE 100 Index of companies...
and The Co-operative Group
The Co-operative Group
The Co-operative Group Ltd. is a United Kingdom consumer cooperative with a diverse range of business interests. It is co-operatively run and owned by its members. It is the largest organisation of this type in the world, with over 5.5 million members, who all have a say in how the business is...
. The top four have specialities in larger superstores, while the Co-op has become the largest community retailer, with specialities in convenience stores and smaller supermarket
Supermarket
A supermarket, a form of grocery store, is a self-service store offering a wide variety of food and household merchandise, organized into departments...
s. At one point in early 2007, Somerfield was also briefly surpassed in size by Waitrose
Waitrose
Waitrose Limited is an upmarket chain of supermarkets in the United Kingdom and is the food division of the British retailer and worker co-operative the John Lewis Partnership. Its head office is in Bracknell, Berkshire, England...
, and the independent grocers' distributor, Nisa-Today's, is comparable in size.
Criticisms
- Somerfield was alleged to have "given up on ethics" after withdrawing from a voluntary ethical trading agreement.