What analysts think of plan for Asda to seek stock market flotation

Date:4th October 2011.'Judith McKenna, Asda's chief operating officer, addressing colleagues at the launch of the 2012 Jane Tomlinson's Run For All series at Asda House, Leeds.
Date:4th October 2011.'Judith McKenna, Asda's chief operating officer, addressing colleagues at the launch of the 2012 Jane Tomlinson's Run For All series at Asda House, Leeds.
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THE announcement that Walmart is to consider an IPO for Leeds-based Asda could be a potential tactic to tempt financial buyer to take over the supermarket chain, it has been claimed.

However Shore Capital analyst Clive Black said “a dual process may be underway”.

READ MORE: Asda could be given an IPO by Walmart

Mr Black said: “News wires have been buzzing a brief from Wal-Mart International that it may list Asda following the prohibited merger with Sainsbury’s.

“Such a move would not come as a major surprise to the market, nor ourselves it should be said, as Wal-Mart has clearly suggested that the UK does not form part of its strategic thinking.

“Asda is asset backed from a freehold mix basis and has the George brand, No.2 by clothing volume in the UK. Its core grocery business has been in decline for much of this decade, stabilising more recently with more resource from the centre until Roger Burnley’s leadership.

“We shall await further updates but clearly base profitability and cash flows, future projections, likely dividend pay-outs and solvency ratios plus Wal-Mart’s potential involvement, are likely to be key valuation factors. Additionally, no doubt a dual process may be underway, an IPO could be a tactic to tempt financial buyers too.”

Walmart - the world’s biggest retailer - told Asda managers at an event on Tuesday it was mulling listing Asda, but that any preparations would “take years”.

Judith McKenna, Walmart’s international chief executive, said: “While we are not rushing into anything, I want you to know that we are seriously considering a path to an IPO - a public listing - to strengthen your long-term success.”

The comments come after Britain’s competition watchdog put paid to Sainsbury’s audacious £12 billion bid to merge with rival Asda earlier this month.

Meanwhile union have demanded an urgent meeting with Walmart over the IPO.

Gary Carter, GMB National Officer, said: “Walmart needs to remember they are playing with people’s lives while they try to make billions on the stock market. Asda needs to work with GMB to sort the contract debacle causing uproar among the workforce before any float takes place. Any new investors must realise Asda is a profitable well-run company thanks to our members’ hard work.”