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.

Sorry chaps this is a dead duck!!
A big sell!!!

i agree transco......you only need to walk into woolies to know not to buy shares in this outfit. also, retail is bad news right now.
maybe wait for a couple of years to see if things improve

Correct Scot completely lost and dead in the water!! imho

Maybe not - it depends on "who" they get to replace the complacent B-J.

A new figurehead might make something from this weak team. It can hardly get worse!

They are increasing footfall, but haven't yet boosted spend. The store-sales were opportunities they can't be blamed for taking. The cash is always useful. I hold a few. I don't think they should have taken the FSA=fine lying down - what else were Execs about to do with their precious time?

I don't think this business will be taken over, other than to grab the floorspace. The business model is as close to broke as possible - but it just needs to a little better in most departments - and that would be resorative, IMHO.

a new person....and a good one!.....this will take at least a year to bear fruit and probably 2 years.

anyway, down again a fair chunk today.....also market is poor and this alone with bad retail will mean share wont perform for next 2 years.

best check it out in 2010 to see where it is.

now under 8p

Whats happening ...

someone handed back a tube of smarties, lol

following copied from a valuation of wollies taken from advfn thread
2entertain - 200 million
EUK - 300 million
Bertrum combined - 50 million
Leases show to have a value of 100 million not including stock.
minus debt of 200 million and the pension liability leaves a surplus of 350 million or 25 pence per share.
Shorting has been overdone.

Shorters closin g it seems - good time oppertunity maybe

When were the leaseholds last valued?

Not sure but apparently a recent analyst value was zero. So much for his opinion as four london store leases were sold to waitrose recently for 25.5 million - see RNS re store disposal dated 18/06/08.

How can a leasehold have no value? Just another example of mis-information no doubt put out by brokers to depress the sp.

Halifax - several reasons why leasehold can have no (or even significantly negative) value e.g. new 15 year lease negotiated a few years ago in boom times at acceptable rent then, but not now and with and upward only rent reviews written in. Can't beat a bit of freehold....

Partridge recent announcement by WLW of sale of 4 leaseholds for 20m suggests you are grossly underestimating the value of their remaining 7-800 leasehold properties. If Waitrose are prepared to pay that much for high street sites then why not other supermarkets? The rising price of fuel is forcing shoppers to stop going to out of town superstores and shop nearer to their homes in town.

who cares....as woolies is pish store...has been for years

looking strong with all these buys going through now.

Halifax - I have no view on value of WLW leaseholds, merely pointing out that value is dependent on terms of lease and of course store location. Waitrose no doubt cherry picked the few they wanted - and were prepared to pay handsomely for. If WLW hold lots of leases with relatively low rents and fixed terms before next review, then they may well have lots of hidden value. The reverse may also be true. Not a holder in WLW, but imo they had to raise some cash and selling some of their prize assets was quickest and cheapest way to do it.

No all they need to do is manage their inventory far better than they do and the cash will rolll in.

Partridge which "prize assets" has WLW sold?