Somerfield bid pullout dismissed

  • Baugur to press ahead with Somerfield bid

  • Icelandic group rubbishes pull-out speculation as 'nonsense'

  • Investigation 'not in interest of the company'

  • Baugur to sue State of Iceland

Somerfield bid: Icelandic retail and equity group Baugur has dismissed reports that it is ready to pull out of the consortium bid for UK supermarket chain Somerfield after fraud charges were lodged against its chief executive officer. If the takeover of Somerfield is successful, it would make Baugur the fifth-biggest food retailer in the UK.

Weekend press speculation suggested that Baugur had contacted the bid partners - Apax, Barclays Capital and property magnate Robert Tchenguiz - offering to step down to avoid the deal being derailed. Baugur is believed to be providing 25 per cent of the equity in a£1.1 billion offer.

Baugur has called these reports 'nonsense' and has dubbed the fraud charges against its chief executive officer Jón Ásgeir Jóhannesson and five others 'politically motivated'.

The charges: the National Commissioner of the Icelandic police has charged six people - including Jóhannesson, his father, sister, former chief executive officer Tryggvi Jónsson and two auditors from KPMG Iceland - with 40 counts of breaking the criminal code, commercial code and other statutes. The charges will be filed at Reykjavik District Court on August 17 and a trial is likely this year.

Baugur's position: in its official response, Baugur claimed it was the victim in the case and stressed that it does not admit the accusations.

The police investigation was launched following allegations made by former Baugur business partner Jón Gerald Sullenberger in statements to the police on August 25 and August 26, 2002. A house search was conducted in the offices of the company on August 28, 2002.

Baugur accuses the authorities of 'serious deficiencies in the preparation of the case and the initial actions taken by the police'.

It says that the suspects believe this is the principal reason that the investigation has been expanded and extended beyond the initial accusations. Its annual general meeting declared the investigation as 'not in the interest of the company'.

Baugur Group is to sue for damages from the State of Iceland 'in compensation for the losses caused to the company by the police'.

Baugur snapshot: assets include UK retailers Hamleys, Iceland, Karen Millen, Oasis, Coast, Whistles, Goldsmiths, Julian Graves and MKOne. Accusations of financial wrongdoing have dogged the company ever since the police investigation began in 2002 and these effectively scuppered its move to take a stake in Arcadia the same year.