Somerfield, the UK supermarket retail chain appears to have fought off the proposed takeover bid from entrepreneurs John Lovering and Bob McKenzie.
Springwater, the company set up by the two businessmen to bid for the chain, announced yesterday that they would not make any further approaches to the company after Somerfield rejected two earlier bids and refused to co-operate with the due diligence process.
In April, Somerfield received a speculative offer of 103 pence per share from Lovering and Mackenzie, valuing the company as a whole at around £500 million (€700m). This bid was duly rejected by the Somerfield board on the grounds that it undervalued the company.
The same reason was given just last week for the rejection of a second bid, this time at 120 pence per share and valuing the company at nearer £585 million.
Somerfield said that it welcomed the clarification from Springwater, whose bid for the chain also involved selling a number of outlets to the Sainsbury's group. But Somerfield's board added that it was concerned by Sainsbury's decision to file a merger notice with the Office of Fair Trading regarding clearance to acquire Somerfield 171 stores - outlets which the company has not agreed to sell.
Sainsbury's said in a statement that it was seeking permission to buy the stores, most of which are convenience outlets with an average floor space of around 6,000 square feet, even though under current stock market regulations it will not be able to make a bid for them for at least six months.
The City Code, which regulates takeovers, stipulates that a company which has formally renounced a bid for another company cannot make a fresh bid for at least six months, unless invited to do so by the takeover target. Although Sainsbury's did not make a direct offer for the Somerfield stores, the acquisition was linked to the Springwater bid and so lapses as a result of that company's decision not to proceed.
"However, Sainsbury's is seeking merger clearance at this time in order to reduce regulatory uncertainty in the event that Springwater wishes to bid again at the end of that six-month period or is permitted by the Takeover Panel to do so at an earlier date," the retailer's statement said.
Sainsbury's would be allowed to bid for Somerfield within the six month period if a rival company made a firm offer for the chain, however.
Somerfield appears to have ridden out the current storm, but as it continues to strengthen its position it will inevitably be all the more coveted by the larger players- certainly once the long-running Safeway takeover saga is over.
The fact that Sainsbury's was interested in Somerfield's convenience-style stores is also of note, as it shows the larger chain's continued commitment to the c-store sector. Sainsbury is some way behind larger rival Tesco in this market, although it recently announced plans to extend its convenience store partnership with petrol station operator Shell.
Meanwhile, market leading food retailer Tesco has reported first quarter sales up 15.1 per cent year-on-year, with growth driven by strong performances at home and abroad and helped by the continued expansion of the non-food and retail services offering.
Total UK sales for the twelve weeks to 17 May were up 12.3 per cent (or 8.7 per cent excluding the recently acquired convenience store arm, T&S). Like-for-like sales were 5.8 per cent, driven by strong volumes of 5.5 per cent following strong volume growth last year.
International sales were up 28.4 per cent in the first quarter, with all countries contributing to the growth.