Co-op keen to purchase Somerfield

The Co-op is run on behalf of its members

The Co-operative Group (Co-op), the UK's fifth largest supermarket chain, has said it is in talks about buying rival Somerfield.

Discussions are at an early stage, but the Co-op said there would be a "strong fit" between the two companies.

The news came as the Co-op said it would spend £1.5bn to revamp its business and lift its fortunes, after 2007 profits fell 46% to £195.5m.

The firm aims to double its profits over the next three years.

Declining profits

The Manchester-based Co-op is a mutual business, run on behalf of its 2.5 million members.

The Co-operative Group now has the critical mass necessary to deliver real change Co-op chief executive Peter Marks

It expanded in July of last year when it merged with fellow mutual United Co-operatives.

With more than 4,300 retail outlets across the UK, it employs 85,000 people.

The Co-op blamed the decline in profits on factors including post-merger integration costs.

Dividend payments to its customer members have more than doubled from £22m to £45m.

"The Co-operative Group now has the critical mass necessary to deliver real change," said Co-op chief executive Peter Marks.

Bristol-based Somerfield has 900 stores.

Apax, Barclays Capital and a private equity consortium led by property tycoon Robert Tchenguiz bought it for £1.1bn in 2005.