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.

WOW WLW now 9p+!!

Expecting to see another spike shortly.Too much buying pressure building.

Peter Shearlock of Sunday Times taking a punt on Woolies. Has tripled his holding to average down but still needs about 18p to break even.

Let's hope he is right. Those of us with a modest but below 9P will be smiling.

Let's assume that the Dir at WLW are honest, - so then their repeated trading statement should be taken at face value - I agreed with Peter Sherlock as I'd bought a few below 9p ( as billco suggests), although I'm also av dn from much higher. Nevertheless the additional shares have cost relativly little and should be showing a decent return.

There was also a suggestion that WLW should sell its stake in the JV with the BBC - but I can't see this is anything more than giving the City some work - and selling the family silver to boot, so don't!

If WLW could sort-out its stores, which I don't think is too difficult, then these too will make a very sustainable business.
They need to address:
Store stock - too much the same, little added-value.
I don't want to see 12 items which are the same product, just because they can't be bothered to control the stockroom. (Example of cheap a4 folders - lots of colours, but all jammed together and all 2-ring at 79p . . . . so where is the 4-ring, better covers at 2? - hardly any more effort to stock - but significantly more profit and try to get folk to go there for "the cheaper opion - with the better option, for you to try" 4-hole binders are better if you want to keep the papers for any length of time...
The internet catalogue - Arrgh I tried it for a TV ( that's 350) - Arrgh! OK to buy a CD or maybe a child's toy - but frankly I don't know what level of product I'd want to buy, without seeing it, feeling it, etc.

So it may be getting Right, but Execs are not worth the fees. It's taking too long and there are too many faults that have been neglected.

Looked at over a 2-year investment, today's prices are pretty cheap. IMHO.

Looking at the chart WLW has been traded down (possibly by Baugur) over the past two months on the back of a rumoured Christmas retail sales collapse. WLWs post Christmas trading update suggests sales are up 11% on 2006. So what is going on with the sp? Maybe Baugur is trying to wear shareholders down so that when they make a derisory bid of say 20p per share the directors and shareholders will accept because of fatigue.

Moving north today after RNS heading for my 20p target.

Think just about everyone who's bought into this from December has a 20p target.

I disagree, but execs must go...they are very non-operational IMHO - the earlier sp ranged between high 20's and 40p . . . .
. .. We have to ask if the Market was wrong then? - I suspect it reflected the yield then . . . created from the cash-flow.

...I do not suggest all is well in WLW stores - there is plenty of room for improvement and their internet offering as well. But that's the excitement by taking a "risk" now. If you want safety - er, buy . . . . - No I can't think, all stocks are pretty suspect right now.

Current sp probably reflects the risk that the Yield will be cut, despite Execs telling us everything is more-or-less OK over the Xmas period.

Dividend level will be determined as usual by year end PBT which is likely to be higher than 2006. With the sp giving a yield greater than 15% it might be more cash effective to start a share buy back programme.

I hope not!
I cannot recall any instance of share-buybacks that's done long-term good for shareholders. General Market trends are far more likley to move prices and cutting the dividend will lower the sp in the short-term, IMHO.
If the money was used to provide a good dividend, that would boost sp.

Furthermore. it's often the case a Company then borrows money from the Bank in a deal that beggers belief....like now since money isn't cheap.
Any surplus funds should be used to move store emphasis, recruit better staff and offer the customer ( remember them?) a far better choice.
Would you prefer a lower dividend, just to buyback shares?

As long as the shares are yielding more than the cost of borrowing money then a share buy back may be justifiable and don't forget the smaller the issued share capital the higher the eanings per share.

If as stated in today's article on AFX wlw's 40% stake in EUK is worth 200 million (which is more than their 160 million market cap) then when the partnership with BBC expires in March they could sell and use some of the proceeds for a tax efficent share buy back.

Halifax,

Jon Rees and Neil Craven, Financial Mail
27 January 2008

Woolworths is now free to sell its stake in its DVD joint venture with the BBC, which could be worth much more than the High Street retailer's stock market value, Financial Mail can reveal.

Under the terms of the 2004 2 Entertain deal, Woolworths was unable to sell its 40 per cent holding until December 31, 2007.

too speed

hangon how right you are ... share buybacks do increase the value of the company also make the performance of the directors appear better and their targets [performance bonuses] easier to achieve but what they also do dear deluded [not you wlw] directors is make a juicier, cheaper take over target and with that make your cosy job more likely to disapear while I your unfortunate shareholder grow thiner.

Can any reader give me an instance of a share buyback increasing the value of a share .... No it is DIVIDENDS that make the price go up.

If you were trying to design a downhill piste for Val d'Isere or Kitzbuhel : it would probably look like the Woolworths graph, it's as simple as this : Woolworths is full of crap !, their cd's are second best to HMV and Virgin, kitchenware, you probably would not buy there, the whole store is second rate to everywhere else, they can't say they are the best at anything because they are not, the company is lacking direction, full of bits and pieces that nobody wants, it needs a new direction..!,takeover bid coming ?, it would be the best thing for them !

Answer Vodaphone.

Financing




RNS Number:8642M
Woolworths Group PLC
30 January 2008

Financing





Woolworths Group plc announces that it has entered into agreements to refinance
its current bank revolving credit and other facilities with new 4 year
facilities totalling 385million.



The facilities comprise a 350million secured asset based lending facility and a
35million 2nd lien loan. The asset based lending facility has been arranged
and underwritten jointly by Burdale Financial Limited (a subsidiary of Bank of
Ireland Group) and GMAC Commercial Finance plc. The 2nd lien loan is provided
by ADM Capital. The option exists to extend the asset based lending facility
for a fifth year.



The new financing will provide long-term facilities which flex with the Group's
working capital requirements. This is particularly important as the Group's
Entertainment Wholesale business continues to develop.



As a result of moving from unsecured to secured facilities, the Company has
agreed with the Trustee of The Woolworths Group Pension Fund to grant them a
63million 3rd lien security. The Company has agreed that the pension fund
would receive the first 50million of proceeds from any future disposal of the
Group's investment in 2 entertain, at which point an equivalent amount of
security will be released.



Commenting on the new financing Stephen East, Group Finance Director, said: "The
new financing arrangements provide the Group with flexible long-term facilities
which will enable its continued development, and in particular, support the
growth in the Entertainment Wholesale businesses."

From Merrill Lynch
Woolworth upgrade dated January 9th 2008
LONDON (Thomson Financial) - Merrill Lynch have upgraded Woolworths Group
to 'buy' from 'neutral' citing the benefits that would accrue should the
retailer opt to sell its 40 pct stake in its publishing joint venture 2
entertain.

It notes that Woolworths has an option to sell its 40 pct stake in 2
entertain -- which the broker values at 214 mln stg -- in April.

It said the proceeds from a sale could repay all outstanding debt, fund the
pension liability, and leave 3.2 pence to return to shareholders. Adding
that the rump would primarily be a wholesale business; with any enhanced
transparency a positive for valuation.

Moneyman any chance of a link to the article?

With todays Financing RNS 350m secured asset based loan the current market cap of the company looks under half of what the companies worth on paper. Todays RNS suggests that the share price should be 24p a share.. Good news, lets hoe that the volumes continue and we'll soon be pushing even higher.

Talking of downhills, the bump up we see today could be the last one at the bottom before the finishing line !