Woolworths shareholders in “bear hug”

Source: Retail Digital

Date :19/08/2008 14:21:15

Only two days after Woolworths Group rebuffed Baugur Group’s takeover bid, analysts have warned that they may be forced to re-open discussions.

The initial offer was made through Iceland, owned by the Baugur Group, which also owns 10 percent of Woolworths and its partners.

However, Woolworths rejected the bid on the basis that it was too low and would have created pension liabilities.

The retailer is expected to announce that its pension scheme deficit has reached £100 million.

A report by Morgan Stanley last year warned that underlying profit at the retailer was negligible, despite sales of £1.7 billion, making it a “worthless” venture.

However, Morgan Stanley also warned against the full break up of the group, which Baugur favoured, stating that would be “quite impossible.”

Familiar Face

It has been suggested that if the Baugur bid is successful, it would like the entrepreneur Malcolm Walker to run the chain. Walker would make an interesting appointment as he was fired from Woolworths in 1971. It was discovered he had been moonlighting with fellow-employee Peter Hinchcliffe, secretly setting up the company which became Iceland.

In 2001, Walker resigned from Iceland, but returned four years later to buy it with a group led by Baugur.

It is understood that Baugur is trying to win over Woolworths’ other supporters and shareholders, in an attempt to force them back to the negotiating table.