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Somerfield sold for £1.6bn

The Somerfield supermarket chain, which was acquired by a consortium led by Apax Partners and Barclays Capital in 2005, has been sold to the Co-operative on a cash-free, debt-free basis.

Somerfield, the UK supermarket chain with approximately 880 local grocery stores across the UK, has been acquired by the UK-based grocery operation the Co-operative Group from a consortium led by Apax Partners and Barclays Capital for £1.6 billion ($3.2 billion, €2 billion).

In January, the syndicate of European buyout firm Apax and investment bank Barclays, as well as UK real estate tycoon Robert Tchenguiz, came up with a plan to sell the supermarket chain for £2 billion to £2.5 billion after receiving unsolicited approaches in December, a source close to the syndicate told PrivateEquityOnline.com. UK supermarkets Asda, WM Morrison, J Sainsbury and Tesco were thought to be considering bids, however as rising food costs, slumping consumer confidence, and the credit crunch made potential buyers skittish, the offers reportedly came in well below the asking price. Co-op was the only suitor to publicly identify itself.

The consortium acquired the company in November 2005 for £1.8 billion. It reportedly shelved a £1 billion refinancing in August after the problems in the credit markets rendered rapid recapitalizations a bull market phenomenon. According to reports the consortium has made a 2x profit from the sale.

The Co-operative Group is the world's largest consumer-owned business, with 85,000 employees across all its businesses. Regional and local retail societies are corporate members of the group. When the two food businesses are combined, they will operate more than 3,000 grocery stores and generate net sales of about £8 billion, Somerfield estimates, making it the fifth largest food retailer in the UK with a market share of approximately 8 percent.