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.

exactly many critics, most of whom unlike you and I Hangon are not holders why don't they come up with sensible suggestions as it is apparently so easy to do, while the heavily condemned management are given no credit for the BBc deal or did that happen magically.

Got in at 8.64 so I'm happy, figure theres plenty of value here. If everyone else is so much cheaper and better then the last set of results would have reflected in a great loss which they didn't. Tesco don't stock the range that Wollies do for a start, games for one are top 10 in Tesco and a little cheaper, Woolies do 100s and gamers tend to use games shops for the range and are more likely to get a sale or multiple... If this wasn't fact then the likes of super expensive Game would have gone out of business for the likes of Tescos, Asda & Sainsbury a long time ago. Wollies stocks a good range of many items in the middle of the market, not as cheap as poundstretcher or wilkos but not as expensive as the specialist shops like Game, Virgin, HMV etc.

Big promotion going on with Disney for "High School Musical".

Well, it's almost working, but woeful management keeps the old gal down!
GameGroup just released a small fall in T/O and were marked down - yet WLW is still in the penny-stock area.... I guess it's the stuck management that is the issue- difficult to know who did the BBC-deal - I suspect it was a result of the Music they sell, possibly an opportune purchase some way back - anyone know?
Not that this is much concern, for I'm not sure they should sell the family silver, even though the City would make lots of money out of the Deals, legal and advice, etc. . . . it would reflect on WLW shares once the money was lost ( or is that Special Dividend?) . . . thereafter WLW would be very sick, I suspect.
I am always hoping they will come up with some innovative ideas - anything to cut stock and up "value" - for example I don't understand why they stuff shelves with many of the "same" items - better to offer a small range of "value" items, with a few "Up-Stage" items which clearly demopnstrate the benefits - at a greater profit margin!
. . . but it seems they'd rather stuff the shelves with cheapo good, even to the extent of damaging the items.
There's just not enough information...in my view.

Subject: Broker recommendations
Date: Tue 4th Mar 2008 7:35:40
Country: UK
Industry: General retailers
Company: Woolworths Group PLC


BROKERWATCH Woolworths initiated at HSBC as 'overweight', target 16 pence

LONDON (Thomson Financial) - HSBC has initiated coverage of Woolworths
with an 'overweight' rating and a target price of 16 pence, according to
dealers.
In a note to clients this morning, HSBC said Woolworths had the
potential to realise shareholder value via disposals and trading recovery.
It said Woolworths is a strong recovery candidate which could release
substantial value over the next two to three years by disposing of and
de-merging operating divisions.
The broker said the potential disposal of 2 Entertain would be a
short-term trigger to a company re-rating.
Woolworths shares closed at 10-3/4 yesterday.
brian.gorman@thomson.com

Hopefully another attack on 12p to come.

Yes grossly undervalued with a dividend yield of 15% and final results due on 2nd April 2008.

Lets see if other analysts also re-rate now results are out, I think 16p would still leave them overweight, typical conservative estimate by HSBC I think.

There has been more TV advertising lately, is this just London area, or have other regions noticed this also?

My only concern is that many shop-prices appear deeply discounted, which increases turnover but cuts profits. ( I bought a gardening multi-tool in stainless for 1.99 - used it once already).

At last, their Big-Red catalogue is out ( 1st week in March). and already they've lopped 50 off a notebook computer . . . very nice but when you go inside - zippo.
Do they want to sell them, I wonder?
Perhaps that's the wonder of woolworths!

Decided to have a punt on woolies amongst the bloodbath that is todays markets as some people see this as being undervalued...hope they're right !

Don't want to sound like ramping...but to me I can imagine another retailer wanting to snap WLW up...I suspect though that the dividend might be cut.

Just checked : at the interims .43p...at the finals 1.34p...not bad dividends for a stock that worth less than 10p.....somebody mentioned 16p value...I might agree !

If profit forecasts are achieved then it is quite possible the directors might propose a share buy back in view of the extremely low value being placed on WLW's shares. In this market dividend yields are being totally ignored as we have seen with the banks.Also the recent poor press given to the activities of the 10% Icelandic shareholder Baugur may lead to some corporate action soon.

Well the market has to bottom out somewhere...let's hope it's soon !....they might move the head office out of London where property would be cheaper, I don't know if they own the freehold on Marylebone road if so, I'd purchase some headquarters outside the M25 and turn the building into groundfloor shops and above luxury flats !

can anyone give an example where a buy back has increased the share price ... wlw have held up very well in the current market; a maintained or nearly so will do us all no end of good and adjust the sp very nicely thank you.

tipton11
CCT done very well with buy backs 80p to 200p+ last year.

many thanks driver I have never managed to find one myself

Hopw many shares did they buy-back - Grief it musdt have been nearly the whole company, or was it a stock manipulation that made the sp move?

I'm with Tipton11 on this - being unaware of any company that has benefited shareholders by a Buy-back programme. There are always far-better uses for the cash - special dividend to shareholders, cash for a rainy-day, reducing overdraft. But far better to keep it safe.
As soon as a co (with a falling sp) creates a rise (by buying its shares), that triggers other sellers and the sp falls back. Why else would the market not react?

Far better to sack Directors who cannot thing what to do with company profits.
( are profits so rare, I wonder?)

Talking from a purely trading point of vue...there could be some money to be made in the ups and downs in this one....!

Share buy backs are tax efficient.