Reports that The Co-operative Group could secure a deal to buy Somerfield within the next week are wide of the mark, The Grocer has learnt.
The society was in exclusive talks to buy Somerfield but a deal was still some time off, a source close to The Co-op Group said. "A deal will not move that quickly," he said. "Something could be agreed in principle but due diligence would have to be carried out, so it will be some time yet."
The source confirmed the Co-op had tabled a £1.7bn bid for the supermarket chain, well below the £2bn to £2.5bn Somerfield's owners private equity firm Apax Partners, Barclays Capital, property tycoon Robert Tchenguiz and Kaupthing Bank had in mind.
Meanwhile, sources within the wider Co-op movement have dismissed concerns that The Co-op Group, which is still digesting its merger with United Co-operatives in July last year to create the UK's largest co-operative society, could be biting off more than it can chew with Somerfield.
The Co-op Group would sell off the larger outlets in Somerfield's 900-store portfolio to other retailers, sources said. Asda is thought to be interested in acquiring about 200 if the deal went through. "There would be a good strategic fit if Somerfield became part of The Co-op," a source said. "They occupy a similar niche in the market and it would increase The Co-op's market share and buying strength."
James Flower, a retail analyst at Verdict Research, added: "In an ideal world, I imagine The Co-op would have preferred to have completed integration with United Co-op, then look for acquisitions, but this has come up and it makes sense for them to go for it."
"The Co-op is no stranger to mergers and acquisitions but it will have to tread carefully because it would be a big acquisition," he added. "I am sure there will be teething problems, but if it pulls it off, The Co-op would emerge stronger."