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.
(Article continued below)
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.

Blackdown, I think TB-J means that WLW has products that shoppers will pay "full-price" for.

I just wish they keep getting better at the sharp-end.....but they have never attracted the best staff, have they?....and this appears to go all the way up, IMHO.
Of course the sp is a strong arguement and I'm surprised the yield hasn't improved, with the sp at an all-time low...

Do you have any ideas...as to how WLW could compete better...?

Hangon,

What do you mean about the yield not improving with the share price being so low? I worked it out that it's approximately 11% providing they pay out the same dividend next year. And yes I am a holder of WLW for the yield, although the all-time low share price keeps on reaching new records.

Sorry Bluelady, you're probably right. I was relying on the MoneyAM calculation panel - silly of me, although I don't know what it's there for, if it's so inaccurate.

(I reasoned the dividend was cut and the panel indicated the position "today".)

Yes, I agree about sp "new lows" - but WLW always was the sickly-child of the previous owners - and has been allowed to stay still far too long.......do you attend their AGM's?
+ Are you often in their Stores?

I understand their Web-venture is doing OK - (but that is impossible to verify In-Store)....although I have to say I'm not impressed by the Catalogue presentation and technical data. - - - - but it was done... to "get things going."
In-store, however, with WLW "buying power" they could exercise some imagination - so their product has that "something" to make a small price-difference look like good value. They don't, so I can assume they think their customers can't either.

( A sentiment I hold for Jessops, also)

Hangon,

At least I understand why you thought the dividend was the same....however, although I have bought for the dividend I have a slight suspicion it may well go down.

I have a friend whose husband works for WLW she says the price of DVDs are not very competitive even with the husband's discount!!!

I do occasionally go in there and buy somethings and it is heaving with customers but whether they are buying is another matter.

The basic problem to me is that there is no clear cut reason for their existance ie., it used to be selling in penny numbers on large %age to people who couldn't buy the full package. Now we can all aford it.

I bought in @ 14.69 last week as Blue did for yield I also think that childrens clothes etc and the Red Book might well become quite profitable and on top of that the number of stores together with the name must be more valuable than present prices.... good luck to all believers!

going down..

Is it?

9p soon.

That much?

I saw the Citigroup broker note that said 12p and sell rec.

Not a pretty sight!

Good luck to those who stay in, these strugglers have a habit of coming back big one day.

Look at Marconi?

No, forget that, how about Easy Jet and Marks and Sparks?

Can be done but will it happen here?

You decide.

Grr did someone mention MarCONi, whose Execs now reside at ISYS...oops, wash my mouth.
tipton11, let's hope you're right, I hold from somewhat higher and don't feel I want any more of this lacklustre business. The real issue, IMHO is that Management ( starting at the Board) is similarly lacklustre and this means that in store the customer experience is no better than anywhere else ( Local shop/Tesco/ etc)....it being pretty difficult to get anyone to improve!
Today I joined the queue in my local WLW....reasonably busy.....but quantities of products in baskets by the queue.......no prices! These are similar stock to last week, so I guess it's a Co policy to leave prices off. I didn't buy anything extra.
It is said WLW problem is that the average spend is just 3 - so the store is full of people spending very little. Management/Execs are treading water waiting for their retirement, I guess. Grr.

Bluelady:
Sorry to read about the DVD-competitiveness - I wonder if this is because WLW also supplies titles to other outlets..... and any discount would damage that business?

could they go bust thats my question..?

Isnt it illegal to display goods in a retail outlet without putting prices on the goods?

mitzy any company can go bust as to whether this will, I doubt it.

My reasoning is that someone will snap them up especially at this sort of price.

The EUK business is worth 16 pence alone so all the rest is free.

anyone can go bust but are woolies that bad ... it's certain that theres no hope of Mr Brown intervening, I wonder if others regard that as an addvantage?.

Mitzy - if banks want their money back from retailers, they generally put the boot in shortly after Christmas, for obvious reasons.

I recall that Bishbosh was thinking of breaking the compnay up and spinning off arms like EUK.

Could be a good idea.

The lowest price to get them today was 14.75p, so it did not go as low as a couple days ago 14.50p, and had a good bounce at the end.

Just be positive for tomorrow and Thursday rate cut

5 day chart

Woolworths main business effectively worthless..


http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2007/12/05/cxmktrep105.xml

Mitzy; Lets have all of it shall we?

Woolworths, the struggling high street retailer, slipped 1 to 15p after Citigroup warned that its main business is effectively worthless.

Woolworths, the struggling high street retailer, slipped 1 to 15p after Citigroup warned that its main business is effectively worthless.


Analyst Bruce Hubbard slashed his target price from 23p to 12p, noting that "the largest part of this business has no long-term future in its current form".

Some bulls have touted Woolworths as a break-up target, arguing that EUK, its music and DVD distribution business, could be spun off from the main retail business.

But Citi thinks that such a move would be difficult because "the retail business is arguably not viable as a stand-alone entity

(due to the deterioration in the pension covenant) and because EUK is heavily vertically integrated into Woolworths".

That leaves a very bleak outlook. "The combination of ferocious long-term pressures in retail, and serious cyclical consumer pressures, mean that even if the management's multi-channel strategy does give breathing space, the fundamental value case remains unproven," Mr Hubbard said.

At Woolworths' last trading update on October 31, chief executive Trevor Bish-Jones insisted: "We continue to be cautious about the trading environment and have planned accordingly by focusing on cost control, cash generation and margin enhancement."

At current market levels, Woolworths is worth just 219m.

Some points here that were mentioned yesterday, Bish-Jones still has his work cut out to turn this ship around imo.

I recall his last thought was to offer his resignation last year, don't see how that could help as he was a breath of fresher air then.

I will buy when they fall to 8p..