Bernard Ginns: For retailers, growth is everything. But what is the cost?

That’s the question that Dalton Philips at Morrisons and Andy Clarke at Asda will be pondering over the next few weeks as they size up the pros and cons of buying Iceland, the frozen food retailer.

It is being put up for sale by officials overseeing Landsbanki, the failed Icelandic bank and majority shareholder with 67 per cent.

The chain has 750 stores across the UK, an enticing prospect on the face of it for any of the big supermarket groups, which want to grow but face significant planning and regulatory constraints.

This is why “literally everybody” will be having a look to see what they could gain, according to one industry expert.

Last week, we know that two directors from Morrisons, Richard Pennycook and Gordon Mowat, met with various investment banks in what could be the first step towards making a bid.

Reports at the weekend that they are planning a £1.5bn approach seem premature though. But Iceland has to remain very attractive to Morrisons and would dramatically increase its market share.

It would also have the benefit of boosting the retailer’s presence in the South East and provide it with an entry into the convenience store market. Morrisons would face strong competition, should it decide to go ahead.

Asda is said to be “seriously considering” joining the fray while Sainsbury’s is also expected to take a look at some of the stores.

Speculation is mounting that private equity firms might be interested in Iceland, with reports suggesting naming Apax, BC Partners, CDR and Lion as potential suitors.

Amid all this speculation, a note arrived from analysts at Shore Capital which said: “Not that we are in any way cynical, but one could come to a conclusion that the vendors are seeking to develop an auction that helps realise the top price perchance?

“In general we would say that the trade should have a better chance of generating synergies and so the ability to pay more than private equity for the retailer.”

Competition could also come from another quarter in the form of Malcolm Walker, the Yorkshire-born founder and chief executive of Iceland.

Speaking yesterday, on his first day back in the office after a charity trip to Mount Everest, he said that he wants to buy out the majority shareholder and has no intention of selling his minority stake.

Analysts at MF Global have questioned whether he could raise the £500m needed to compete with the likes of Morrisons, Asda or private equity.

In summary, then, it could come down to a fight between Morrisons and Asda.

Both have declined to comment so far.

Andy Clarke at Asda might decide against making such a move – you could say he has quite enough on already with the integration of 147 stores bought from Netto.

Interestingly, there were reports at the weekend that Asda’s parent company Walmart is opening a new office in London to look at European takeover opportunities.

Might Iceland be one of those opportunities?

For the ambitious Mr Philips at Morrisons, it might represent the sort of challenge that defines a career.

I’ll draw this commentary to a close with some choice words spoken to me a few weeks ago by Allan Leighton, the retail veteran.

He said: “The market is as the market is, but the game is don’t lose any share.

“But at the same time, the game is don’t get yourself a lot of share that you pay a lot of money for because that’s folly.”

Folly indeed. Takeovers can transform companies. They can also destroy them.

THE former Labour Minister and Sheffield MP Richard Caborn delivered a damning verdict on the Establishment in his speech at the Cutlers’ Feast in Sheffield.

The permanent secretaries who head the various departments of state are the real power brokers in public life, he contested, but they have no understanding or experience of the manufacturing sector.

Mr Caborn said the heads of the business, energy, finance and cabinet office departments should be ousted and replaced by Graham Honeyman, of Sheffield Forgemasters, Pam Liversidge, the engineering entrepreneur, Kevin Parkin, the turnaround expert, and Professor Keith Ridgeway, of the Advanced Manufacturing Research Centre, respectively.

He was speaking in jest, with an underlying serious question, asking if the leadership of our civil service is fit for purpose.

It’s a fair point, but his Government had quite enough time in power to make the necessary reforms to the Civil Service and the way it operates.