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.

We musn't forget that the Debt is the Elephant in the room - so I'm inclined to revise any earlier figures.
1) We'll never see 50p again unless the shops turnabout and profits roll in. "2015...?"
2) Stores can be improved, as can staff attitude, products etc...it just a pile of do-do at present- so almost any improvement is worthwhile
3) The Big Red catalogue appears to have been forgotten - just as well, it was rubbish - presumably IF there was a focus group they had an interest in a negative outcome - how else explain it?
4) Products - some should be "that bit extra" in my opinion - if you sell "me-too" product then folk might as well go to Tesco and choose from their selection of "average" gear.
5) If the Music business has value, they'd better make use of it soon, before it loses anything - the way I see Downloads going ( and pop groups, film-DVD etc ) we may not have a "music arm" before long - BUT I don't know......however, on past facts the Execs at WLW know far less....
6) Cull 10% of WLW Execs at each AGM - so the shareholders can have some fun and focus their minds on the business. Maybe even give Staff of the Month an incentive of 1000 shares ( not sellable for 1-year).....
7) It all hinges on their recovery plan - but I object to having a Ch Exec and Chairman to pay for - why can't they each go visiting stores and buck up ideas -
8) Complacency and dullards only need apply....there, I've dared speak it.
9) so what sp?:- I think 10p is about minimum evens - it has to be worth more if any signs of a recovery are showing - so maybe 15p - with 20p-ish if things go well...then we "could get a bid" with a range 25-40p - but maybe less if it's quite soon and involves the Debt being kept on WLW books - let's suggest 12p - and WLW shareholders get stuck with maybe 6p-worth of debt, so anyone buying at 6-pence will make nothing - the Bid is 12, the debt is -6 and th sp will be negative, until it's mangled, rights etc - BUT that would remove the shops for Nothing! That can't be right!

So we need maybe 20p with the debt being -6p leaving shareholders with no shops and nop debt, just the Music business and a small profit of maybe 8p in return for all the Shops......not convinced this is a Good Deal? No, it isn't...We need the shops improved, wih better stock and better staffing, better ticketing, descriptions an helping hand...


Grr!
Up a tad today = MM's hoping for something more...Huh!

up a tad today hangon. Have you bought yours today like me?

The retail arm is virtually worthless and they don't want to sell the other bit.

They may be forced if enough support can be gathered according to todays news.

Second bid

http://business.scotsman.com/retail/Consortium-set-to-test-Woolworths39.4403737.jp

janetbennison, thanks for asking - no I bought at 8p, believing it couldn't get worse, but have been unaware of the Debt issue - now it's out that should subdue any Bidders.
I really hoped T BJ would get the Stores sorted out...it seems so simple to me...."sell the sizzle" and folk will come in and spend...at the moment they come in and spend almost nothing. Last fortnight I was there whilst three young staff watch a YL unpack a child's toy - the Q being were batteries included?...and what size/qty were needed. Do you think this was evident? - No, in the end I helped her unpack the thing and only in the Instructions was the information found.

Now if you are selling a battery-toy, how do you expect to gain shopper's respect if the toy is given to the child without batteries....what are the FIRST things the child will ask?
1) Can I open it? ( that's, "May - - ")
2)how does it work ( that's childspeak for where are the batteries!)

The child is not interested in the large barcode, or the picture, of some other child playing with their toy! Nor is a list of toy-specific advertisement slogans - utterly no use.

A picture of the number of batteries and how they fit would be nice (on the back, so even a non-toy adult gets the idea) - or, if it had a swing card..."from Woolworths with love" - and on the reverse..."batteries: Order 1pk AAA(qty 3 reqd)"....would be nice.
But you know I am getting rather bored with trying to do Execs job even slightly better than zippo. These guys earn nearly 1/4 million quid - for that price you could get twenty young graduaters(?)....It's about time they realised they need to shift some gear...and do it just slightly better would be enough.....although having the toy with the power-saving timer would help the batteries "rest", before the child flattens them permanently.

What I mean is - with their Buying power, get the deluxe version with some "extra" for similar money - up-sell and both customer/child/shareholder is happy....and customers will spread the news.....It's not rocket science!

It's just so poor, yet no-one would believe it.

the stock market falls are terrible today. I have bought woolworths and they have fallen with market today. We may still get out with a profit. Baugur will not just walk away without a fight, they do own 10 percent of the company. So it is in their interest to try to get the shops. It will be interesting to see how this develops. good luck all holders.

Some interesting spikes occuring today.

Don't know if you saw this the other day

http://www.mcvuk.com/news/31520/EUK-takes-grip-on-channel

Weekend Press suggested new exec is getting down to sorting out this businies - I just hope he spends a week, or two, working in the stores.

other than one should never buy on t/o hope, this may be worth a flutter

Possibly so, from what I've been reading over the w/e. Certainly hasn't much further to fall as it's nearly at zero now!

Toya - we all thought that at 20p and again at 15p, and at 12p and 10p, 8p - each time we couldn't see it getting worse....so I'm wondering where these "sellers" are lurking...are they folk like us? Or is it Institutional investors getting out of all retail as the Market tends to knock foot-fall.

Fundamentally we all know the stores are poor - and this only has to make each day a few % worse than before . . .to show a fall. By introducing improvements ( and I don't like cutting prices - I prefer better-value=higher profits). Until the stores are improved ( and here I don't like "make-overs" - it goes far deeper IMHO).

By addressing the store-issues, profits should rise and with it the [WLW] sp.

I think the key issue is that WLW own(?)/operate from a huge number of prime high-street sites (185 from memory? - sorry, not at home so can't check) - and these are what would make it attractive to possible bidders - it's certainly what Malcolm Walker of Iceland would appreciate!

Yes Toya, I can't disagree with what you say - but from "our" virewpoint I want [WLW] sp to rise. A TO may not be much above the level that recent execs will benefit - leaving punters and staff holding losses, again!

The only possible bidder "with clout" ( that's a large chequebook!) would be someone like ALDI - who could introduce Food bargains and hence the foot-fall would increase many times. However, I doubt they'd want to expand too quickly, so WLW might die more - - - - following death-by-a-thousand-cuts . . . . (as it were). Therefore I wonder if such a deal might be in shareholder interests.

For this reason alone, I suspect the "best route" will be to improve the stores and stick with the business, with a few changes that I have in mind . . . .

best route is prob to avoid the stock!

Virtually all of WLW's portfolio is leasehold. There will be a mixture of assets/liabilities in the portfolio.

if 99 year leases with more than 50 o/s, they still have good value ..... whether or not one should be throwing money at the company today is another matter

This share has been a total disaster for me, everytime I bought it plummeted. I paid 30p on average per share. I'll be lucky to get 10p if anyone actually buys it.

Easilly the worst investment of my life and don't get me started on the dividend.......

and will a predator pay 50% over current sp?