 Buyers have been stalking Somerfield for some time |
Somerfield, the UK supermarket chain being stalked by potential bidders, has reported weakening sales as it faces intense competition and subdued demand. The retailer added that takeover talks had reached an "advanced stage", although nothing had yet been agreed.
Like-for-like sales fell 0.4% in the year to 30 April, and were down 2.7% in the nine weeks to 2 July.
Despite waning demand, the firm posted post-exceptional annual profits of �60.9m ($107m), up from �45.2m in 2004.
Somerfield added that takeover talks had reached an "advanced stage", although nothing had yet been agreed.
Cracking up?
However, fresh doubt has been thrown on the whole takeover process after one of the leading members of the consortium chasing Somerfield was charged with fraud and breaches of accounting rules.
UK newspapers carried reports on Wednesday that the investigation of Jon Asgeir Johannesson, chief executive of Icelandic retailer Baugur, threatened to break up the consortium in talks with Somerfield.
The Financial Times and the Guardian newspapers also claimed that the probe was linked to an aborted attempt by Baugur to buy UK retailer Arcadia in 2002. Baugur and Iranian property tycoon Robert Tchenguiz confirmed earlier this year that they were discussing a deal with Somerfield.
A number of banks and investment funds also have been linked to the group, as have property tycoons Ian and Richard Livingstone.
'No certainty'
Somerfield chief executive Steve Back warned that there was "no certainty at this time that an offer for the group will be forthcoming".
However, "discussions have now reached an advanced stage" and "a comprehensive due diligence process has been undertaken with substantial progress having been made by interested parties".
Optimism that some deal would be forthcoming has underpinned Somerfield shares, and in London the stock closed 2.5 pence higher at 193.5p on Wednesday.
"This stock is just an asset play at the moment," said Tim Attenborough, an analyst at Exane Securities.
Amid the difficult trading conditions, Mr Back said that the company was continuing its store improvement programme, expanding across the UK and refocusing its Kwik Save business.
The main drag on the Somerfield group's sales came from its Kwik Save chain, where like-for-like sales were 6.4% lower in the nine weeks to 2 July. Sales at Somerfield stores were down 0.7%.
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This stock is just an asset play at the moment
