The Co-operative Group completes its acquisition of Somerfield

March 02, 2009

The Co-operative Group, the UK’s largest mutual retailer, has completed its £1.565bn acquisition of the Somerfield supermarket chain.

The deal propels The Co-operative into the “premiership” of food retailers, creating a stronger fifth player in the UK grocery market with 8 per cent market share and 3,000 stores generating annual sales in excess of £7bn.

“This is great news for customers of both The Co-operative and Somerfield. It is a transformational deal which cements our position as the UK’s number one community retailer and returns us to the premiership of food retailers. It is no longer the Big Four, it’s the Big Five,” said Peter Marks, Chief Executive of The Co-operative Group.

“Our first priority now is to start integrating the two businesses – something that will bring real scale benefits, enabling us to provide better value to our customers. There is a strong strategic fit between these businesses and we are looking forward to creating a single business combining the inherent strengths of both Somerfield and the Co-operative Group.

“Somerfield has some great people and we are delighted to welcome them to the Co-operative family.

“The Co-operative business model, built on trust and sound business ethics, is experiencing a renaissance as consumers increasingly appreciate the integrity of our brand, whether it be as a food retailer, a financial services provider or one of our other community businesses. The acquisition of Somerfield and the proposed merger with the Britannia Building Society, set us up for an exciting future,” added Mr Marks

The enlarged food business will be headed by the Group’s managing director for food, Tim Hurrell. The integration process is likely to take up to two years, with the Somerfield brand remaining in some locations throughout that period as stores are gradually converted to The Co-operative brand. The Somerfield Bristol headquarters will be retained for about 18 months, while all head office functions are moved to Manchester on a phased basis. Relocation opportunities will be offered to as many staff as possible.

Since taking the helm, 20 months ago, as Chief Executive of The Co-operative Group, Peter Marks and his team have turned around the Group’s performance. After 12 successive quarters of like-for-like growth, sales (excluding fuel) in the Group’s food stores in the 7 weeks to 21 February were 6.2 per cent up on last year, whilst sales in its 700 re-branded food stores were up on average 12 per cent. Over the same period like-for-like sales in Somerfield were up 3.6 per cent and in stores less than 5,000 sq ft, were up 7.4 per cent.

The Co-operative Group, which also has interests spanning financial services, pharmacy, funerals, travel and farming, has just announced a record advertising spend of £70m this year. This includes a £10m campaign to support the largest re-branding exercise in UK corporate history. To date, as part of a £1.5bn makeover, the Group has refitted and re-branded 2,700 of its 4,300 outlets with the new look The Co-operative identity.

Commenting on the The Co-operative Group’s acquisition, Paul Mason, Chief Executive of Somerfield, said: “Today marks the culmination of the phenomenal turnaround in the Somerfield business over the last three years.  The Co-operative Group is buying a business that is in rude health, with strong, positive like-for-like sales, and a profit margin that has doubled since the business was taken private in 2005. I would like to thank my senior management team and all those colleagues who have made this transformation possible.

“This is an exciting time to become part of The Co-operative Group and is good news for our Somerfield colleagues. The Co-operative Group is enjoying a renaissance since the merger with United.  It is the leader in the small store and convenience market, which is forecast to continue to enjoy good growth going forward.  It is also a business that has trust and ethics at the core of its brand,” he added.