Will Woolworths Be Sold? Persistent Rumours Say A Takeover Is In The Making
The Company that sold Dick Smith for $20M and then gave up a profit share for $75 million only to see the Company floated for $520M in late 2013, is struggling to grow after trying to gouge high prices out of Australian shoppers up against an aggressive Aldi and a low cost Coles.
Share in the Company have risen 5% in Sydney on media reports of a possible takeover after new rumours emerged that US private equity giant KKR had a bid that could be “almost ready” for consideration.
It would be one of the biggest deal in Australia’s corporate history, the Australian newspaper said.
The news comes amid turbulent times for the supermarket chain.
Woolworths’ media team made no comment in relation to the takeover rumours, while KKR’s media team in Australia was unavailable for comment.
Earlier this month, Woolworths announced that its chief executive, Grant O’Brien, was stepping down after nearly four years.
The firm also said it had plans to cut about 1,200 jobs. The changes are aimed at cutting millions of dollars in costs and improving sales after Woolworths’ first-half profits fell.
The retail giant has been up against rivals such as Coles and Aldi and it has been trying to win more customers with improved stores and competitive pricing.
Woolworths recently cut its profit guidance for the year to June 2015.
Listed investment company BKI has declared itself a recent ‘buyer’ of shares in the troubled retailer Woolworths despite concerns the new chief executive could “rebase” earnings following the company’s loss of direction.
“We have been selectively adding to [our] position in Woolworths of late,” BKI’s senior investment officer Will Culbert told shareholders in a newsletter.
“It is becoming increasingly apparent that, in recent years, Woolworths management lost its focus . The Company has focused on store rollout rather than refurbishment and price – this has damaged customer perception on value and experience.
“On income, we remain optimistic on the outlook for a sustainable and growing income stream from Woolworths. The company offers an attractive yield (more than 7 per cent on a grossed-up basis) and a sustainable dividend.
“The company has $2.1 billion of franking credits. Woolworths has never cut its dividend since listing in 1993.”
While Woolworths has said the chief executive, Mr Grant O’Brien is to leave the retailer, “the issue of greater concern for us is the tenure of the divisional heads” BKI’s Mr Culbert said.
“The chief financial officer, head of supermarkets, head of Dan Murphys, head of Big W and head of Masters have all been in their current roles for less than eighteen months. While we view all as capable operators, companies often need a few people who know where the bodies are buried.”