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Nov 19, 2008

UK century-old Woolsworth to sell Its Stores

Woolworths Group Plc, a century-old U.K. retailer whose shares have lost 90 percent of their value in two years, started talks to sell its stores as the Times said a turnaround specialist may acquire them for almost nothing.

The retailer fell 27 percent in London trading. Woolworths, whose 815 stores sell goods from candy to appliances, said today that there's ``no assurance that any offer will be forthcoming'' and didn't name the potential buyer. Spokeswoman Susanna Voyle wouldn't comment on a report in the Times that said Hilco was in talks to pay 1 pound ($1.50) for the outlets.

At that price, accepting a bid would show Woolworths' prospects have deteriorated since August, when the company rejected a 50-million-pound bid for the stores from grocery executive Malcolm Walker. Retail stocks have plunged as Britain heads towards a recession, with Woolworths' decline exacerbated by concern about suppliers' credit insurance and debt levels more than five times greater than the company's market value.

``The clean sale of the retail arm for 1 pound still risks leaving precious little for shareholders,'' Nick Coulter, an analyst at Numis Securities, said in an e-mail. ``Woolworths' retail arm is viewed as a net liability. We continue to advise investors to exit on strength.''

Debt Concern

The stock fell 1 pence to 2.8 pence at 10 a.m. in London, according to trading data from the London Stock Exchange. An acquisition of its stores would leave Woolworths with its EUK division, which supplies books and CDs to third parties including Tesco Plc, HMV Group Plc and Wal-Mart Stores Inc.'s Asda supermarket chain.

The retailer had net debt of 295 million pounds at the end of the first half, up 35 percent from a year earlier. Its current market capitalization is about 40 million pounds, according to Bloomberg calculations.

That debt level and the company's 100 million-pound pension deficit are likely to be major factors in the negotiations, the Times report said. Hilco's recent investments include discount clothing chain MK One.

Woolworths reported a wider net loss of 68 million pounds in the first half and suspended its dividend as consumer spending slowed and competition from supermarkets sapped sales.

Source : Bloomberg
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