Iceland boss launches Woolworths bid: Report
The founder of the Iceland frozen food chain has launched a surprise bid for Woolworths retail arm, a report said today.
Malcolm Walker is heading a consortium that has made a formal approach to Woolworths chairman Richard North about acquiring the chain’s 815 stores, the Sunday Telegraph said.
The group includes Icelandic investment group Baugur, which holds a 10% stake in Woolworths, the paper added.
Mr Walker, who is currently chief executive of Iceland, is thought to have offered “tens of millions” of pounds for the under-performing division. The consortium is reportedly not interested in acquiring EUK, Woolworths entertainment wholesale division, or 2 Entertain, its music and video publishing joint-venture with the BBC.
Woolworths retail business has been battered by competition from supermarkets and internet retailers.
The group saw like-for-like sales fall 6.7% in the six weeks to July 26, with margins under pressure because a greater proportion of trade came from CDs and DVDs, rather than higher margin outdoor products and clothing.
Under the deal, Mr Walker would run the chain as a going concern. But the Telegraph said he was only willing to proceed if the Woolworths board agreed to retain most of the group’s debt and wipe out its pension deficit.
At its financial year end on February 2, Woolworths’ net debt was £124m (€157m). And according to Woolworths’ annual report, it has a pension deficit of £48.2m (€61.2m), but this is due to be revalued.
These figures could suggest that the consortium is effectively asking Woolworths to pay it to take the stores off its hands.
One executive close to the situation told the paper: “Woolworths’ retail division has a negative value and is weighing on the share price. The share price will only rise if Woolworths gets rid of its retail division.”
Mr Walker actually started working at Woolworths in the mid-1960s as a management trainee. He eventually set up the first Iceland shop in Oswestry in 1970 and saw it become a national operation.
Last week Woolworths chairman Mr North unveiled the group’s new chief executive, former Focus DIY boss Steve Johnson. His predecessor Trevor Bish-Jones left two months earlier.
Mr North said Mr Johnson’s experience at Focus DIY meant he had “a great deal to contribute to the recovery and growth of the Woolworths Group.”
Woolworths, which is currently working on a strategic review, also revealed last month that consultants believed it had the potential to build a sustainable business based on its small and medium-sized stores.
No-one was available to comment from the company.
