Commission to probe Somerfield

THE Office of Fair Trading has asked the Competition Commission to investigate the purchase of 23 of 114 Safeway stores by the country's fifth-biggest grocer, Somerfield.

'We identified 22 mid-range stores and one one-stop store which raise possible competition concerns, using the Competition Commission's methodology,' OFT executive director Penny Boys said in a statement on the watchdog's website.

'In light of this, the OFT considers that it is appropriate for the commission to undertake a detailed investigation of the transaction.'

A spokeswoman told AFX News the probe had been ordered because the OFT felt it did not have sufficient time to investigate in detail whether the deal fell foul of the commission's own guidelines. She pointed out they were drawn up primarily with larger supermarkets in mind.

The commission is expected to report by 6 September. Somerfield bought the stores from rival grocer William Morrison for £260.2m.

Somerfield has also attracted the attention of Icelandic investor Baugur. Somerfield sent Baugur away with a flea in its ear last month after rejecting a possible £1.03bn or 190p-a-share offer - conditional on completing due diligence.

But there is speculation that Baugur, which holds a 5.5% stake in the company, could make an increased offer in the region of 220p a share, valuing the group at £1.2bn.