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WOOLWORTHS REJECTS STORES TAKEOVER BID

Woolworths rejects takeover bid

Monday August 18,2008

By David Shand

WOOLWORTHS yesterday rejected a takeover approach for its 815 stores from a consortium led by Iceland founder Malcolm Walker.

The proposal is thought to have been made to Woolworths chairman Richard North last month.

It was backed by Icelandic retail investor Baugur, which holds 10 per cent of £97million Woolworths as well as stakes in other UK retailers including French Connection and Debenhams.

The consortium was interested only in the company’s chain of high street stores and not its EUK entertainment wholesale business or its 2Entertain music and video publishing joint venture with the BBC.

Woolworths argued the deal involved a complex restructuring which in practical terms was not achievable.
“It undervalued the assets of the company and potentially would have adversely impacted the group’s existing funding arrangements,” it said.

Woolworths was also unhappy the proposal would have saddled it with all pension liabilities for current and former employees of the stores.

Baugur is understood to be disappointed by Woolworths’ rejection of the proposal, as it believes the stores can best be run privately and create more value over time under Walker’s leadership.

He is currently Iceland’s chief executive, and it is thought the plan would have involved him retaining his stake and a board position there while taking up the role of chief executive at the Woolworths store chain. It would have meant a return to the company after nearly four decades for Walker, who joined the group’s Wrexham branch as a management trainee in the mid-1960s.

Walker founded Iceland in 1970 but left in 2001 amid controversy following his sale of a large chunk of shares just before a profits warning.

He returned to the helm when Baugur bought Big Food Group, Iceland’s then parent company, in 2005. The company has since enjoyed an upturn in sales and earnings.

Woolworths is confident of building a “sustainable value retail proposition” based
mainly on its small to medium sized stores.

Last week it recruited former Wickes DIY chain boss Steve Johnson as its new chief executive with a package that could be worth more than £8million, depending on business and share-price performance.