Asda and Farmfoods ‘in £1.4bn bid to buy Iceland’

ASDA is reported to have teamed up with Scottish frozen food supermarket chain Farmfoods to make a £1.4bn bid for frozen food retailer Iceland Foods.

Leeds-based Asda, which declined to comment on the report, is understood to be competing against Bradford-based Morrisons and four private equity firms.

Morrisons also refused to comment.

It is understood that, if successful, Asda would sell around 200 stores to Farmfoods.

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Asda and Morrisons are thought to have tabled bids at the top end of the £1.3bn to £1.5bn price range as both could make sizeable cost savings through synergies.

They would have to sell around 200 of Iceland’s 800 stores to get round the Competition Commission.

Morrisons could team up with Waitrose, Lidl, Sainsbury’s and Tesco to offload parcels of stores.

The private equity bidders are thought to include BC Partners, Blackstone, TPG and Bain.

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Iceland Foods’ chief executive and key investor Malcolm Walker is thinking about bidding for the company later in the process, with backing from pensions funds and sovereign wealth.

Mr Walker, who founded Iceland in 1970, has a 23 per cent stake along with other managers.

He has a tactical advantage over his rivals because he has the right to match any offer for Iceland.

Landsbanki’s resolution committee will decide if the offers represent enough value.

Mr Walker’s £1bn offer for Iceland was rejected last year.

“There are only two real outcomes here,” said a source.

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“Either a grocery retailer buys Iceland and does a deal to dispose of some stores, or Mr Walker buys it with passive investors like pension funds.”

Pension and sovereign wealth funds are traditionally passive investors compared to buyout houses that usually want majority control and see themselves as hands-on managers of the businesses that they buy.

Creditors of collapsed Icelandic banks Landsbanki and Glitnir gained control of their 67 per cent and 10 per cent stakes in Iceland after the demise of investment group Baugur.

Morrisons has launched its Christmas TV advertising campaign during The X Factor.

The new adverts star Strictly Come Dancing host Bruce Forsyth alongside Andrew “Freddie” Flintoff.