Icelandic retail investor Baugur is set to walk away from the consortium planning a bid for supermarket chain Somerfield, according to the Guardian newspaper.
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Baugur has been under pressure to quit the consortium since it emerged last week that its chief executive, Jon Johannesson, had been notifed of criminal charges against him in Reykjavik, the paper said.
Baugur’s partners in the consortium – private equity group Apax Partners, property entrepreneur Robert Tchenguiz and Barclays Capital – told Johannesson that they were unhappy with the “reputational risk” he posed to the bid.
There were also fears that his presence would make it difficult to raise the money to finance a bid likely to top £1.1bn (US$1.9bn).
At least one member of the consortium made it clear that his organisation would simply refuse to work with Johannesson.
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By GlobalDataA source close to the negotiations said talks were taking place yesterday to find a way in which Baugur might be able to “walk away gracefully.”
The Baugur boss was determined to stand his ground, citing the contract the partners signed to bind them together. It is unclear whether they will have to compensate the Icelandic company for work they have contributed to the bid plan. There could also be a break fee payable.
If Baugur is effectively thrown out of the deal it will be a serious blow to the ambitions of the Icelandic company, which owns a string of British high street names, from Goldsmiths jewellers to the Mk One fashion chain, Hamleys toy store and Iceland supermarkets, the paper said.
Yesterday’s consortium talks were going on as its bid target announced full-year profits ahead 63% at £53.1m.
Somerfield chief executive, Steve Back, refused to comment on Baugur, but warned investors there was no certainty that any deal would be done. The chain, which also operates Kwik Save, is negotiating with a second possible bidder, London and Regional, a property company run by Ian and Richard Livingstone. Back said talks with both parties were at “an advanced stage”, but added: “I must make it clear that this may or may not lead to an offer.”
The chain, he said, did not need to be taken over and would prosper if both would-be buyers pulled out. “We have a strategy in place and no reason to change it. Somerfield is a great business.”
