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.

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?

I doubt whether they are 99 year leases. There will be limited demand from other retailers if WLW was to put all/large parts of its portfolio on the market.

Rumour is that Alan Sugar is about to launch a bid.

ct. I think that was just a joke on the other side that got taken seriously by some!

my memory is that Alan Sugar is genuinely looking to retire with his son taking over ..... i woiuld also doubt very much if he would have any interest in competing with himself by getting into retail

Philip Green might step in.....he tried to buy M&S not so long ago !.

why would he want to do that?
WLW sells sweeties, not schmutter

Perhaps that's WLW's problem....not enough sparkle.....woolies should be the shop you can depend on....if I was the likes of the big retailers...I would pounce now and snap Woolworths up !.