Asda possible bid Somerfield

Supermarket chain Asda has appointed investment bank Lazard to explore a possible bid for food chain Somerfield, the Financial Times reported on Tuesday. Asda, the UK's second largest supermarket group and owned by Wal-Mart, is looking to extend its presence in the UK market.

Although it is not yet clear whether Asda will go through with an offer, it is expected that its interest in Somerfield will pressure other interested parties into formalising their offers. Other potential bidders include Baugur, the Icelandic group, which joined forces with a consortium that includes Robert Tchenguiz, the property entrepreneur. Property groups London Regional and Topland have also shown interest.

Earlier this year, Baugur made a proposal of GBP 1.03 billion, which Somerfield subsequently rejected. The Barclays-Apax-Tchenguiz consortium then made a proposal of 205 pence per share, which valued Somerfield's equity at GBP1.12 billion. The informal deadline for interested parties to put forward a proposal is this week. However, if Asda appeared on the scene, this could change.

If Asda were to aquire Somerfield, this would mean a considerable step forward in Wal-Mart's UK strategy. Asda would thereby enter the convenience sector, which Wal-Mart has previously avoided.

A possible acquisition could raise the issue of competition. Under regulations, the convenience and supermarket sectors are considered separate from eachother. However, since Tesco and Sainsbury, the biggest and third biggest supermarkets respectively, have moved into the convenience store sector, this destinction has been criticised. Asda and Somerfield could not be reached for comment.