takeover bid strategy - a very interesting read...

Should you chase the takeover targets?
In 2004 it seemed that every second high-profile firm around the world was either taking a firm over or being taken over itself. In the US, Cingular bought AT&T Wireless, for example, and, in the UK, Banco Santander bought Abbey National, and the on-off saga of Marks & Spencer (M&S) occupied column inches for weeks on end. But according to the investment bankers, we havent seen anything yet. Theres no reason to doubt their prediction. As John Plender points out in the FT, they know at first hand what is in the merger and acquisition (M&A) pipeline. And if they are right, its excellent news for investors: share prices tend to soar when bids are announced.

Take the case of Aggregate Industries. Three months ago, Sandy Cross of Williams de Broe tipped the building materials firm in MoneyWeek at 95p, saying that it looked a manageable size for a predator. He was right. This week, Switzerlands Holcim said it intends to bid $1.78bn or 138p a share for Aggregate Industries. Today, the shares are trading at around 145p - anyone who bought in November is sitting on a 53% gain.

So if this really is the start of the year of the deal, wheres the best place for investors to place their bets? There is scope for consolidation in all sorts of sectors, from telecoms equipment to travel, all over Europe, but in the UK it is the retail sector that is getting all the attention. Analysts have long been warning that British retailers were going to have a nasty end to 2004 and a worse beginning to 2005, and Christmas seems to have been every bit as poor as the pessimists feared, says Chris Brown-Humes, also in the FT. Higher interest rates, a weak housing market, record levels of personal debt, higher utility bills and increased public transport costs are all squeezing the ability and desire of households to keep spending. The result? A lot of our retailers are suffering and that could make them easy pickings for predators. Indeed, one of the only things supporting retailers share prices right now is the prospect of takeover activity.
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Venture capitalists are still on the prowl, as is the Icelandic retailer Baugur, and Tesco and Asda might make a move on a rival. All of which leaves investors simply having to guess who the targets will be.

Betting on who they might be has become the latest City investment craze, says Simon Nixon on www.Breakingviews.com. But it isnt hard. M&S and JJB Sports saw their share prices rise even as they announced rubbish numbers as investors calculated this increased the likelihood of a takeover. Perhaps Philip Green will comes back and have another go at M&S.

Other possible targets include J Sainsbury, N Brown, MFI, Matalan and French Connection. But is betting on these firms wise? Debt is now cheap and plentiful, so potential bidders are awash with cash, but if the spending downturn gathers pace, that will change and takeovers will suddenly be harder to finance. And not all the dogs of the retail sector will be rescued by a bid. Some will just go bust instead. As Simon Watkins points out in The Mail on Sunday, some already have. Since Christmas, Scottish carpet maker Stoddard International has gone into administration because of tough trading at its key customer Allied Carpets, and fashion chain Pilot went into receivership as sales fell. These were both private companies, but the lesson is clear. If you are chasing takeover targets, make sure you go for firms that will survive even if they are forced to go it alone.

Woolworths is every inch a major takeover and worth following, a great opportunity if it materialises, the time is ripe once again -58p was recent target price.
remember Doing your research reaps rewards.

fliper yes it is, this abyss is possibly caused by Baugur off loading.

Make the most of it, because the current sp is miles below NAV.

Its cash rather than assets/profits/sales which really matters and WLW looks fairly strapped to me. Not a holder, but notice with the interim figures they changed depreciation policy(and you can guess they now depreciate over a longer period) - never a good sign. Hope they have a good Christmas for all holders sakes.

Good point partridge, I saw that but it did not register.......

Depreciation does not effect WLW's cash position.

Agreed depreciation a non cash item Halifax, but how many sound companies extend the useful life of their computers (new term "asset relifing"!!) from 5 to seven years? In cash terms, current liability borrowings 240M beginning of August against 130M 6 months earlier (seasonal low) and more tellingly 180M same time last year.Other disturbing comment "Lower than expected performance in this period may have an adverse effect on the full year, which may also result in excess inventory especially in seasonal merchandise that is difficult to liquidate". Note inventory 421M up from 366M at the same time last year - could be a big hit coming there - to profit if not cash.Also interesting that in the first half "we undertook no major refit activity" - imo they may well be under pressure from their lenders, particularly in the present climate.

"we undertook no major refit activity" could also refer to the fact that the 10/10 refits have now been completed, these refits were costing quite a lot of profit.

How low can these go ? at an all time low and the chart looks bad . Buy order at 16p ?

I am not a holder but I would not be a buyer of WLW in the present retail climate. Agree with you partridge about your depreciation points

Starting to look like JSP.

SWW - the earlier refits were I believe capitalised, so profit not affected (but cash of course was).

Sorry to have confused by not keeping up.

Do I see the shares XD?

yes last 26th of September

And now is 3 tick up on a row 19 / 19.25p +0.75p

This is looking better.

LONDON (Thomson IM) - Woolworths, Abengoa and Swisscom are among a number of companies most at risk from the credit market crisis, according to a new report from RiskMetrics Group.

The provider of risk management products and services identified over 100 European non-financial companies, grouped into companies with significant short-term debt exposure and weak cash flow; companies with significant overall debt exposure and poor liquidity profile and companies reliant on debt capital to finance their acquisition driven growth.

Based on its research, of the 58 companies which have higher short-term debt exposure and poor cash flow, six had short-term debt in excess of 40 pct of their total capital.

A higher exposure to short-term debt may make these companies less attractive to lenders in the strained credit environment, RiskMetrics said.

Among this group, Woolworths was highlighted on concerns over a decline in the company's like-for-like sales and key cash flow metrics. While Conergy was targeted on concerns that a sharp drop in cash revenue growth and higher cost capitalization may weigh on future performance

[In today's Press Roundup]

The Independent: Woolworths gets swept up in takeover talk

Daily Express: Woolworths soars on William Morrison takeover talk

I had thought their figures weren't looking too good, but perhaps worth a punt??

Something in the takeover , its gone blue mad !

There was heavy trading in troubled retailer Woolworths as investors digested comments also from Kaupthing suggesting a tie-up with a grocer. Traders suggested WM Morrison as a potential buyer. Other rumours linked the luggage-to-pick'n'mix chain with Icelandic retail investor Baugur

I managed to buy in at 21.32p (including costs) this morning - there's got to be some truth to the rumours, judging from L2!

Hola,Good to see this is going north of late hope its stays good until i come home,come on red ken,,its a bargain..