The Co-op has finally agreed a £1.56 billion takeover

of Bristol based supermarket Somerfield this morning after

months of negotiations.

The deal will cement the Co-op’s position as the UK’s fifth

biggest food retailer, with sales of about £8 billion and a

market share of approximately 8 per cent but has left a

question mark over the future of the Whitchurch headquarters of

Somerfield.

The supermarket chain employs about 300 people at its head

office and a further 800 at its stores in the Bristol area.

There are also concerns that some stores will shut in areas

where there are both Somerfield and Co-op outlets operating

side by side.

However, Co-op chief executive Peter Marks said the

acquisition would provide “rocket fuel” for the group’s growth

plans.

 Mr Marks said the deal, which is subject to regulatory

approval, would be good news for consumers and for competition

in the grocery market.

“We will create a stronger fifth player in food and a

convenience store chain with unrivalled geographic reach,” he

said.

The Co-op, which is a mutual company owned by 2.5 million

members, unveiled a three-year plan in April to double profits

and invest £1.5 billion in transforming its retail estate.

As well as currently being the UK’s fifth largest food

retailer, it is the third largest pharmaceuticals chain, the

biggest provider of funeral services and the largest

independent travel business in the country.

Somerfield is made up  880 outlets across the UK and

had  net sales of £4.2 billion in the year to April,

with  earnings of £233 million.

The owners of Somerfield, a consortium including property

tycoon Robert Tchenguiz, private equity firm Apax and

investment bank Barclays Capital, have been looking for a buyer

for some time. They were reported at the weekend to be looking

for a price of £2.5 billion.

Somerfield was taken private by its current owners in a £1.1

billion deal in December 2005.

It began life as JH Mills in Bristol in 1875, but changed its

name to Gateway in 1950 because the city was the “gateway to

the West Country”. The group dropped the Gateway name in 1994

to become Somerfield and listed on the Stock Exchange two years

later.

Somerfield chief executive Paul Mason said today: “With

Somerfield and the Co-operative Group as one business, we

believe that we can learn from each other’s strengths to ensure

we continue to develop the best local grocery shops in

Britain.”