Somerfield buys 114 Safeway outlets

MORRISONS is to hand over 114 of its smaller Safeway stores to rival Somerfield as part of a £260m deal.

Morrisons said the sale would let it concentrate on the larger Safeway stores that it acquired and speed up the conversion of these outlets to its own brand.

Morrisons is selling 63 of the Safeway Compact convenience stores directly to Somerfield for £115m and the other 51 sites, plus a distribution centre in Welwyn Garden City in Hertfordshire, will be sold to Northwharf Investments for £145.2m which will then lease them back to Somerfield.

The move comes less than a week after Morrisons revealed the impact of its restructuring at Safeway. The company has taken out the vast majority of Safeway‘s senior management and replaced them with its own staff.

Bradford-based Morrisons has also ditched a lot of Safeway‘s state-of-the-art computer systems and is relying instead on its own older but tried-and-tested retail technology.

Last week the company said that same-store sales at Safeway stores converted to the Morrisons brand were 12.5% higher excluding petrol, while those not yet converted saw a further slump.

For Somerfield, meanwhile, the acquisition of the Safeway stores from Morrisons marks a significant step up in its plans to increase its presence in the convenience stores sector. Earlier this year it bought Aberness, a chain of similar stores in Scotland.

The acquisition from Morrisons includes £35m of stock and cash floats. Somerfield is funding the deal, which includes seven petrol forecourts, with new bank debt and £50m raised through the placing of new shares.

Somerfield said the acquisition of the Welwyn Garden City depot will also give it significant new distribution capability in the south-east.

Chief executive Steve Back said: 'This acquisition represents an excellent opportunity for Somerfield to grow its estate without a significant increase in gearing and to capitalise on its proven expertise in operating smaller stores.'

Somerfield is also in the middle of a refit programme involving more than 1,200 shops under its Somerfield and Kwik-Save brands.

It said today that trading at both chains during September and October was in line with management expectations, although market conditions remained tough.

Like-for-like sales, which strip out new openings, were 1.4% higher at Somerfield and 0.2% higher at Kwik Save in the eight weeks to October 9.