Massive expansion of convenience stores may boost grocer's profitability
Somerfield's proposed acquisition of 140 Texaco forecourt shops may call into question whether Baugur's offer for the retailer reflects the grocer's true value. If the Texaco deal goes ahead, it will boost Somerfield's forecourt convenience store portfolio to 170 outlets.

Seymour Pierce analyst Rhys Williams said: 'This could be a sensible acquisition for the company. By adding stores, Somerfield will be able to leverage its supply chain, creating more efficiencies, which should increase its profitability. Baugur remains in the wings, assessing whether it would be possible to merge Somerfield with its latest acquisition, Big Food Group.'

Baugur put in a bid for Somerfield on February 9, based on a 190p-a-share offer, valuing the grocer at£1 billion. However, if the convenience store retailer's profitability is increased by the expanded forecourt portfolio, its market value should also increase. Baugur's offer would therefore no longer reflect the true value of the company. Somerfield's board is expected to meet in the next few days to decide whether to open its books to Baugur for due diligence.

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