Baugur pulls out of Somerfield bidding

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BAUGUR will this morning withdraw from the financial consortium said to be pondering a £1.1 billion bid for supermarket group Somerfield - after the chief executive of the Icelandic retail investor was charged with fraud last week.

A source close to the consortium, which includes venture capital group Apax, Barclays Capital and entrepreneur Robert Tchenguiz, said: "Nobody wants to be harsh about this but the rest of the consortium accepts and understands that Baugur would want to spend its time getting its defence together and concentrating on the issues in front of it."

However, it is understood speculation that Baugur's withdrawal will derail any possible bid by the consortium for Somerfield is wide of the mark.

One source close to the talks said: "I do not think anybody seriously thinks that it [a bid] is dead in the water without them [Baugur]. It is not."

It comes as the national commissioner of the Icelandic police said Jon Asgeir Johannesson, head of Baugur, his father, Johannes Johannesson, his sister Kristin Johannesson, former Baugur chief executive Tryggvi Jonsson and two accountants from the company face more than 40 charges.

The defendants vigorously deny all the charges, which have not yet been formally made public.

The Icelandic police said the charges include fraud and breach of accounting rules and corporate law. Reports in Iceland suggest they are connected with the acquisition of an Icelandic retail chain in the late 1990s. A court appearance is scheduled for 17 August.

The extraordinary developments leave the financial consortium up against one other likely bidder for Britain's fifth biggest supermarket company, a grouping pairing London & Regional Properties (LRP) with Nomura investment bank.

LRP is led by the Livingstone brothers.

Last week the battle became a two-horse race when United Co-operatives, a Rochdale-based co-operative society, withdrew from the fray.

Somerfield, meanwhile, was not commenting on the Baugur developments. However, one source familiar with the situation said: "It's not their problem really. Somerfield's management's line is likely to be that it is for the consortium to sort out, but that there are still other players in that consortium."

It is thought Somerfield will deflect nearly all questions on the takeover situation at its annual results presentation to the City on Wednesday, citing Takeover Panel rules.

Even without Somerfield, Baugur already has a strong presence on the UK high street, owning toy shop Hamleys and having significant stakes in food retailer Iceland and fashion group Mosaic, which owns Oasis, Karen Millen and Coast.

In a press release the Icelandic police said the charges followed an investigation that started in 2002 with searches of Baugur's offices and has included investigations in the Faroe Islands and Luxembourg.

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