Somerfield gets a £500m boost as bid is dropped

Somerfield, the supermarket group that last week cold- shouldered a £594m bid from entrepreneurs John Lovering and Bob Mackenzie, is set to reveal a £500m increase in the value of its property portfolio.

John von Spreckelsen, Somerfield's chief executive, sent the potential bidders packing after claiming that their 120p-a-share indicative offer undervalued the company. Somerfield shares, which had been 71p before the bid approach came along, fell back to close at 101.25p on Friday.

Mr Lovering and Mr Mackenzie, who were backed in their offer by rival supermarket group J Sainsbury and bankers Morgan Stanley, are expected to withdraw their bid officially tomorrow.

Mr von Spreckelsen has promised to announce plans to enhance the value of Somerfield in a presentation at the beginning of July.

It is understood that Mr von Spreckelsen will use this presentation to indicate that the group's portfolio of stores is worth nearly twice what it is now valued at, and to commission a fresh valuation by independent surveyors.

Somerfield has not revalued its properties for seven years and they are currently in its books at £542m. Property experts believe the portfolio is worth more than £1bn, an uplift of around £500m.

But the group has to refurbish its stores, particularly its downmarket Kwik Save outlets. This is expected to cost some £800m, which Somerfield claims it can fund from cash resources by taking on extra borrowings. Somerfield has already spent £150m on refurbishments.

The supermarket group's property revaluation echoes a similar move by Safeway shortly after the start of the £3bn bidding war for the chain. It revealed that its property portfolio was worth nearly twice the £2bn valuation indicated in its accounts.

Five bidders are currently vying to take over Safeway.