Baugur rolls Woolies ball

Icelandic investor Baugur Group has been building its stake in Woolworths Group, the UK retailer which was subject to an aborted 58.2p per share, £837m takeover approach from Apax Partners in April 2005.

In trades announced by Woolworths on 9 February and again on 14 February, Baugur established a 6.18% shareholding and then added a further 1.88%, taking its stake to 8.06%.

Woolworths, whose shares closed at 36p on 13 February 2006, will be reluctant to open its books to any half-hearted bidder following its fall-out with Apax, which walked away on 13 April 2005 after being “unable to confirm certain key cash items.”

Woolworths’ share price crashed 25% following Apax’s decision, and left new investors such as hedge funds Elliott Associates and Marshall Wace demanding a cash return.

One observer of the UK retail sector describes Woolworths as a “headscratcher”, with no clear restructuring options, not much property left to sell and to lease back, and a picture not dissimilar to HMV, which recently received a takeover approach from Permira. Woolworths, he says, is “too valuable to dismember. Because of its stock price, it’s not an Alders yet.”

However, Baugur “has made money by not going through with a bid,” he continues. “Baugur buys relatively good stuff and is not egotistical. They will sell their stake. In one sense, they are getting the ball rolling again on Woolworths.”