Blog: Petah MarianWill Morrisons look to swallow Iceland whole or look for scraps?

Petah Marian | 11 July 2011

There has been speculation that Morrisons, which has been tipped to be a major contender to acquire the Iceland Foods chain. However, reports have emerged over the weekend that the retailer might only consider taking on indivdual stores.

Morrisons CFO Richard Pennycook reportedly said last week that the UK retailer had benefited from acquiring stores sold following the acquisitions of Netto by Asda and Somerfield by The Co-operative Group.

However, the report in The Financial Times inferred that the success of these stores could mean that Morrisons, seen as a potential buyer for frozen-food retailer Iceland Foods, could instead only look take on some stores. And that conclusion could be misguided.

For Morrisons to even have scraps to access, it would require either Asda to buy the chain, and then triggering a Netto style sell-off for stores with overlapping catchment areas - and with Netto and Iceland's similar demographic pool, there would likely to be many.

Alternatively, a private-equity firm could snap up the chain and its constituent parts - although this would be unlikely as the location of many of the stores would be unlikely to fetch a premium and would also mean the loss of any equity that lingers in the Iceland brand.

And this is also before considering the desire of current chief executive Malcolm Walker to keep the chain in his hands. He founded the company and also has the option to match any offer - giving him a fairly strong position to take back control of the company - assuming he can finance the bid.

While Morrisons' senior management has emphasised over the past year its ambitions for growth, perhaps unless it looks at a full bid, it may struggle to feast on the winner's scraps.



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