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.

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?

Referring to sale of four leases to waitrose for 25.5 million - good business - what are the other 800 odd leases worth ? Prize assets remain -
2 entertain worth - 200 million +
EUK worth - 300 million
Bertrum combined worth - 50
This is a break up goldmine - are bauger after it - depressing share value by shorting its own 12% holding ?

The way these Big investors work is anyones guess but the FSA should revisit the rules on shorting imo. Nothing wrong with it except in the case of market abuse type actions - if they can be established that is.

Halifax - not a holder, so disinclined to debate at length the strength or otherwise of WLW asset base. Appeared to me they needed some cash quickly and sale of some of their most valuable shops was the best option. Time will tell whether they have better ones remaining, but recent CEO departure, share price, gearing level and trading performance imply that this is a company in some difficulty. Good luck if you hold.

A leasehold can easily have a zero or even negative value. This occurs when the rent paid is in excess of the market rent for the unit.

Somebody tell us which "prize assets" WLW recently sold for 20m? Does anybody know, perhaps a job for the journos? So blackdown you think WLW's remaining 7-800 leasehold shops are worthless?

I didn't say that.

halifax
partridge was referring tohe sale of four leases of london stores to waitrose - not prize assets but to get 25.5 million is v good business. Intresting to know what the other 800 + leases are worth. I think they own the freehold on a small amount .

almoore suggest you read last sentence of partridge post 335 in which reference is made to the sale of "prize assets", my question is which stores were sold and are they considered to be the most valuable leaseholds owned by WLW?

You lot are talking bunkum, get over to the advfn wlw bb and do some real research. partridge if you're disinclined and dont hold what the hell are you spouting off on here for? I hold. By the way good luck to all wlw holders and cheers.

Boldtrader - I was "spouting off on here" because Halifax asked how leaseholds could have no value. Hope you don't learn the hard way....

Good start today bear in mind the drop in the market today.

Leaseholds can have no value because:

* Market rent lower than rent payable - it happens
* Reparing liaibilities can be substantial
* Lack of demand for the sort of properties/sites that WLW has.

The High Street is having a hard time. Retailers like WLW with an outdated concept and high fixed costs are going to have a hard time/go to the wall.