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.

It seems to me the men in black could move in any day, assets to reap and gnashing of the teeth. Must be worth adding to a watch list. Retail is so tender at the mo anything can happen.

WLW doesn't have much in the way of assets. The property is all/mostly leasehold.

Blackdown you're right as I understand it, but WLW is a great cash-generator. The snag is that current management is just not able to sort out minor niggles in the stores, so we hardly notice any improvement.
Any underperformance is largely due to minor market-slews IMHO - the fact is that Mortgage woes have affected all branches of Retail.
The sp fall is really about the risk of the dividend being cut as it is now almost a silly yield% - but this is simply BECAUSE management hasn't been working sufficiently hard.

EDIT:
Should have mentioned: [WLW] is UP 7% - looks like someone knows something I don't - not unusual, eh?

hangon that's a fair assessment.

Of note it is worth remembering that the EUK setup is worth 16 pence per share on it's own.

That being the case, I think this is now a buy with or without the divi as all the rest is free.

I realise it's somewhat of an unknown how they did over Christmas, but their last trading update in October indicated then a 16% increase in sales over the previous 38 weeks.

That should ally any shortfall if there is any over Christmas a little, so I am buying again.

Also if the divi is maintained, the return is 16% yield.

If I were superstitious I would say there are an awful lot of 16's in Woolworth's recently.

Would settle for 16p per share at the moment!

That's a good idea.

This is another double your money get on!!!
The distribution business is worth 30p!!

Dream on. WLW is a tired old brand going nowhere. 3p maybe for the whole lot. Everything you can buy in their stores you can buy just as cheaply/more cheaply elsewhere.

The distribution business is probably based on short term contracts with its clients.

Outcome = v low (nil) asset value.

I disagree, I just cannot see 3p being right, blackdown. (10p today)
- the NAV is considerably higher than MktCap, but there is a chunk of borrowing- so the sp/NAV is about evens IMHO . . . far better than many other stocks!

IMHO the reason for the WLW fall is twofold:
1 Retail woes as consumers stop buying non-essentials
2 Prospect that the dividend may be cut

Then there is management - poor to the extent that every store I visit appears not to be able to get tbeir price-tickets on the shelf. Shelves are overstocked so the goods are damaged as folk pull them out ( possibly to make room for more stock in the storeroom - maybe bad delivery-scheduling etc. ). AND in the summer dead-plants - why? Don't they realise that losing 10% of plants need a lot to be sold just to cover the losses? OR do they have a very sympathetic supplier? - grief!
Furthermore their internet catalogue is "Poor", but at least it's a start - it needs to be the best in the business - not a poor imitation . . . . they lost one Digital-TV sale this fortnight, to that catalogue...hmm.

At 10p to buy this has to be the near-bargain of the year, so far!
But I'm not likely to buy, having enough for my needs.


Plenty of leasehold sites, distribution infrastructure, good footfall etc. so all that's wrong is . . . . Management....

Maybe not as low as 3p, but imv 7-8p, margins must be wafer thin.
2517

What ever is said on here Woolworths is a good old British institution so get down your local Woolis and get some pick and mix.

Make sure you pick the ones with the wrappers on.
2517

Woolies predicts profit
MoneyAM
Woolworths Group has forecast a year to end-January 2008 group profit in line with market hopes.

The group predicts a return to profit at its troubled retail business.

Updating on Christmas trading the group said total sales for the 49 weeks to January 12th 2008 increased 11.2%.

'This performance came against a backdrop of volatile and highly competitive markets,' it said.

'Across each of the businesses, we have worked to optimise profit delivery and anticipate that year-end profits will be ahead of the prior year and within the range of current market expectations.'

Shares in Woolworths closed Tuesday at 10p, valuing the business at �157m. The stock demerged from Kingfisher at 25p in 2001.

Baugur, through the Unity Investments vehicle, which groups Baugur with fellow Icelandic investor FL Group HF and retail entrepreneur Kevin Stanford, holds a 12.2% stake in Woolworths. It has been linked with a possible break-up bid or push for restructuring.

This update is really not too bad, could be better but this is a difficult time.

See this.

Woolworths in-line MoneyAM

Woolworths Group has forecast a year to end-January 2008 group profit in line with market hopes.

The group predicts a return to profit at its troubled retail business.

Updating on Christmas trading the group said total sales for the 49 weeks to January 12th 2008 increased 11.2%.

'This performance came against a backdrop of volatile and highly competitive markets,' it said.

'Across each of the businesses, we have worked to optimise profit delivery and anticipate that year-end profits will be ahead of the prior year and within the range of current market expectations.'

Prior to today's statement analysts were forecasting a profit before tax and exceptional items of 25m-29m. Last year the group made 21.8m.

For the 49 weeks like-for-like sales at the retail business fell 3.2% as it focused on profitable sales and cost control. Profit margins for the full year are expected to be up 'at least' 100 basis points.

'It is anticipated that Woolworths retail will return to profitability in the current year. While the absolute level of profitability will be low, this is an important reversal of the prior year loss (12.9m) and will have been achieved against a background of tough competition and reduced consumer confidence,' it said.

At the group's entertainment wholesale business, EUK and Bertrams, sales increased 46.7%. However, EUK saw 'higher than anticipated' operating costs in the period, alongside a negative margin mix effect driven by a higher proportion of lower margin games hardware sales.

'These factors will, to a limited extent, depress EUK's profitability in the current year,' the group said.

Sales at 2entertain, the group's DVD publishing joint venture with BBC Worldwide, increased 11.7%. International sales were driven by Planet Earth in the US and Little Britain and Dr Who in other world markets. In the UK the Clarkson Supercar Challenge and Richard Hammond's Top Gear interactive DVD were top sellers.

Baugur, through the Unity Investments vehicle, which groups Baugur with fellow Icelandic investor FL Group HF and retail entrepreneur Kevin Stanford, holds a 12.2% stake in Woolworths. It has been linked with a possible break-up bid or push for restructuring.

The sp now depends on the company's dividend policy.

Think this is possibly now a buy on value rather than for income.

Took out a long spreadbet on the June contract earlier, with a guaranteed stop-loss should things get nasty.

Is it possible that Baugur are using their shareholding to short WLW with a view to making a derisory bid which weary shareholders will gratefully accept? Say 16p.

Or 1.6p

A very dangerous game, when Bish=-Jones has given an RNS to the effect things aren't all that bad. . . . . however, the sp says it all and I suspect we'll be seeing a new name on the high-street before long.

WLW - RIP.

Blackdown don't be silly their are still many investors prepared to pay for prominent high street sites.