Co-Op agrees £1.6billion takeover of Somerfield

The move means Co-Op's sales will total £8billion and an eight per cent market share.

The takeover will result in Co-Op acquiring over 3,000 outlets across the country.

Takeover: Over 3,000 Somerfield stores will become part of the Co-Op name

Co-Op chief executive Peter Marks said the acquisition will provide 'rocket fuel' for their expansion plans.

Mr Marks enthused: 'We will create a stronger fifth player in food and a convenience store chain with unrivalled geographic reach.'

In April, the group unveiled a three plan to double profits and invest £1.5billion 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 comprises 880 outlets across the UK and generated net sales of £4.2billion in the year to April, with underlying earnings of £233million.

Its owners, 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.

Last weeken, the were reported to be looking for a price of £2.5billion.

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