NEWS

US bidder offers £1 for Woolworths

The biggest shareholder in Woolworths last night revealed that he will not back a £1 offer to buy the retailer.

The American company Hilco was in talks with Woolworths yesterday about taking over the retailer's network of 800 stores around the UK for a nominal fee.

If Hilco's approach turned into a concrete bid, Woolies would be offered a chance to offload its stores for £1 but retain the profitable wholesale arm of the business, including the Norwich-based Bertram Group.

Last night Woolies' biggest individual shareholder, Ardeshir Naghshineh, chairman of the Norwich-based property group Targetfollow, told the EDP that he believes "a much better deal can be brokered" and warned that the Hilco approach "may not be in the best interests" of Woolworths.

Mr Naghshineh, who built a 10.2pc stake in the retailer through the summer, said he backed the Woolworths board to revive its fortunes and endorsed an outline business plan published in September.

The September plan - which coincided with the appointment of the chain's new chief executive, Steve Johnson - was for the retailer to focus its efforts in future on the chain's profitable small and medium-sized stores. The plan said Woolies would simply "return to retailing basics" and "rebuild authority in our core categories - toys, clothing and entertainment".

Higher costs and higher rents associated with Woolies' larger high street and out of town stores were not being matched by sales, according to the September plan.

Mr Naghshineh released a statement to the EDP last night, saying: "Following confirmation from the Woolworths board that it is in preliminary discussions regarding a possible offer for the retail business, Mr Naghshineh, as the major shareholder, has stated that though he is supportive of the board and chief executive, Steve Johnson, he is not happy to proceed with a deal with Hilco, which he believes may not be in the best interests of the company.

"Furthermore, Mr. Naghshineh is convinced that a much better deal can be brokered that does not under-estimate the underlying value of the retail chain.

"Woolworths is a very strong brand, which he believes has a strong balance sheet and Mr Naghshineh believes that the group could be revived through the outline business plan set out in the interim statement released on the 17th of September, which also announced Mr Johnson's appointment.

"Mr. Naghshineh's assessment is that there is substantial value in the property portfolio which can be realised through a proactive strategic asset management policy going forward."

Woolworths has been a mainstay of the British high street for the best part of a century - beloved by parents looking for bargain clothes and homewares, and tots eager to dip into the pick 'n' mix.

But the rise of the internet and growing competition from the supermarkets have dented its fortunes of late and left it facing losses of close to £100m in the first half of this year.

Mr Naghshineh's purchase of Woolies shares through the summer was followed in August by a £50m bid for the business from the Icelandic group, Baugur.

The Woolworths board rejected the Baugur bid on the grounds that it undervalued the company and did not cover its debts or pension liabilities.

The bid also excluded the profitable wholesale business Entertainment UK, which supplies books DVDs and CDs to supermarkets and which includes Bertram.

Hilco is well known in UK retail circles after acquiring fashion chain MK One this year and subsequently placing it into administration.

It also bought up the debt of Allders in 2005 before the department store chain went into administration. Hilco said its actions, including the provision of £15m of additional working capital, meant 30 Allders stores were sold and 3,500 jobs saved in the process.

But a £1 bid for Woolies suggests that Hilco believes the retailer is close to a make-or-break financial position. Last night Woolies shares hit an all time low, trading a little more than 2p a share.