Asda and Morrisons ‘could bid for Iceland Foods stake’

First-round bids for a majority stake in Iceland are due around Wednesday. Bidders are likely to include Bradford-based Morrisons and Leeds-based Asda as well as private equity firms, according to reports.

However, there is speculation that Morrisons and Asda may be interested only in a parcel of stores, which mean they might join up with other parties.

Landsbanki and fellow failed Icelandic bank Glitnir are selling a combined 77 per cent stake in Iceland Foods. It was unclear whether Iceland Foods’ founder and chief executive Malcolm Walker would be involved in the first round of bidding.

Huddersfield-born Mr Walker, who along with other managers owns a 23 per cent stake, has a pre-emption right, which means he only has to match the highest bid to win the auction.

A person close to the matter, quoted by news agency Reuters, said he had been talking to a number of parties about potentially teaming up with them but had not yet made a decision.

A report in yesterday’s Sunday Telegraph said Mr Walker would not lodge a first round bid for Iceland Foods.

In August it was reported that Mr Walker was believed to have lined up financial backing from Deutsche Bank to buy out the majority shareholder of the frozen food chain. At the time, Mr Walker was said to have been confident of raising funds to buy out Landsbanki, which took control of the stake following the collapse of Icelandic investment group Baugur.

The auction is being managed by UBS and Bank of America Merrill Lynch.

Some analysts say the business could fetch more than £1.5bn.

An Asda spokesman said yesterday: “As a matter of principle, we don’t comment on market speculation.”

Asda said in June that it would look at buying parcels of stores from other chains that may become available.

Asda bought 147 stores from Netto for £780m last year.

Following the success of the 61 converted stores, Asda has decided to increase its target to 250 smaller-format stores. In August, Asda ruled itself out of the bidding for the 800-store Iceland Foods portfolio, saying it was only interested in individual stores if they become available.

At the time, Asda’s chief executive Andy Clarke said a lot of the Iceland shops were under 5,000 sq ft, which would be too small for Asda to convert to its smaller-format stores.

Asda has refused to go down the convenience store route, preferring to offer shoppers the chance to do a full weekly shop with access to up to 10,000 grocery products.

Morrisons declined to comment yesterday.