The prospect of a trade buyer emerging as the mystery bidder for Somerfield has been dismissed by analysts, although some sources close to the business believe it could be an attractive target.
Somerfield announced on Tuesday it had been approached about a possible bid, and City sources said the interested party appeared to be a financial buyer, with the bid headed by John Lovering, chairman of clothing discount retailer Peacock.
Lovering was unavailable to comment, but news of his involvement was "well leaked" said an analyst.
Lovering was chairman of Homebase when it was bought by venture capitalist Permira from Sainsbury and then sold two years later to GUS in November 2002.
The identity of the financial buyer is still unknown but both KKR and Schroder Investments have been touted by analysts. Speculation at first centred on Icelandic retailer Baugur, which has a 3% stake in Somerfield. But a spokesman for Baugur denied it was making a bid and said he believed two parties were involved.
The consensus among analysts was to dismiss the possibility of it being a trade buyer. Most of the stores are located in town centres and Somerfield's 571 stores average just 9,000 sq ft and the 686 Kwik Saves are 1,000 sq ft smaller, making it difficult to fit them into any portfolio except Sainsbury's and Tesco's c-store formats.
If any of the Safeway bidders moved, it would be a clear indication they were settling for second best, said one analyst.
However, one source close to Somerfield believed it was an attractive target for trade buyers. "Three years ago it was making £200m profit so under the right management it could return to those figures," he said.
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Somerfield announced on Tuesday it had been approached about a possible bid, and City sources said the interested party appeared to be a financial buyer, with the bid headed by John Lovering, chairman of clothing discount retailer Peacock.
Lovering was unavailable to comment, but news of his involvement was "well leaked" said an analyst.
Lovering was chairman of Homebase when it was bought by venture capitalist Permira from Sainsbury and then sold two years later to GUS in November 2002.
The identity of the financial buyer is still unknown but both KKR and Schroder Investments have been touted by analysts. Speculation at first centred on Icelandic retailer Baugur, which has a 3% stake in Somerfield. But a spokesman for Baugur denied it was making a bid and said he believed two parties were involved.
The consensus among analysts was to dismiss the possibility of it being a trade buyer. Most of the stores are located in town centres and Somerfield's 571 stores average just 9,000 sq ft and the 686 Kwik Saves are 1,000 sq ft smaller, making it difficult to fit them into any portfolio except Sainsbury's and Tesco's c-store formats.
If any of the Safeway bidders moved, it would be a clear indication they were settling for second best, said one analyst.
However, one source close to Somerfield believed it was an attractive target for trade buyers. "Three years ago it was making £200m profit so under the right management it could return to those figures," he said.
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