Blackfriar: Does Morrisons really need to make a trip to Iceland?

Why it was ever interested in the first place is a better question.

Not that Blackfriar is suggesting Iceland is a poor company. Quite the opposite.

Bradford-based Morrisons recently reported a 0.7 per cent increase in like-for-like festive sales – not a bad showing compared with Tesco’s first profits warning in 20 years.

But Iceland’s sales are phenomenal – thought to be up around six per cent over the Christmas period.

Iceland appeals to a certain demographic, generally mums without much money to spend but a massive freezer.

Frozen goods, unlike Morrisons’ highly claimed fresh produce, don’t go off for weeks or months. It’s pretty hard to mess up the supply chain on frozen foods which means margins can be made at much cheaper prices.

Iceland has a niche and it’s one that Morrisons would find hard to fill.

Iceland mums aren’t interested in 100 per cent British meat or instore bakers and butchers.

They want cheap, easy meals that keep their kids happy.

When Leeds-based Asda bought Netto the deal made sense. Asda subsequently increased like-for-like sales at the Netto stores.

Morrisons nearly came a cropper after its £3bn takeover of Safeway in 2003. It doesn’t want to make the same mistake again and bite off more than it can chew.

Iceland will not be easily digested. It has 750 stores.

Besides Morrisons has quite enough on its plate with rolling out its convenience stores, developing the online grocery business and expanding its Kiddicare acquisition.

Morrisons is also understood to be keen to buy Best Buy’s 11 big box stores.

It would make much more sense for both Morrisons and Asda to pick up stores that the eventual Iceland buyer doesn’t want.

Asda is understood to be talking to buyout firms BC Partners and Bain Capital about picking up stores.

But this could be missing the point.

All Iceland founder and chief executive Malcolm Walker has to do to win the Iceland chain is to match any offer made by BC or Bain.

The price tag of £1.5bn may to too much for the thrifty Yorkshireman, but if he does win it he won’t want to let go of any stores and there are no competition reasons to force him to sell any.

Iceland could be a red herring for Morrisons and Asda.

At a time when Tesco is poised to strike back at the competition which stole its market share and tarnished its crown, both Morrisons and Asda have more important things to think about.

Say you’ve been in your job for five years.

Everyone thinks you’ve put in a good performance in difficult conditions, but now you’re ready to move on.

You’ve explained this to your boss and he or she totally understands and has identified a worthy successor.

The successor joins the company today and you have more than two months to hand over the reins.

That means you’ll be leaving at the end of March when he or she takes over.

So what kind of pay-off or deal could you expect?

Blackfriar would be made to work three months’ notice.

If the new person is taking over the reins on April 1, Blackfriar might be given time off for good behaviour and not be made to work until April 19 but you can’t be sure.

So what happens to the top bosses at PLCs?

John Harnett, chief executive of Leeds-based credit lender International Personal Finance is in exactly the position outlined above.

He gets to leave on April 1 and he then gets a package of a year’s annual salary of £480,000 because he is entitled to 12 months’ notice.

On top of this he can earn bonuses bringing his total package up to £620,000 if the company meets performance targets.

Don’t get me wrong, Mr Harnett is not doing anything out of the ordinary or untoward.

The outrageous truth is it’s totally normal for chief executives and chairmen to be given these sort of golden goodbyes.

How is it that executives’ contracts are so generous?

It’s obviously built in to contracts to stop executives jumping ship and joining rivals, but it seems overly generous in such austere times.

While the Government sets about tackling corporate pay packages it should also take a look at this common PLC practice.

If a company decides it wants to rid itself of an executive or make the role redundant by all means the incumbent should be given a pay-off.

But how can paying someone because they want to leave the company be in shareholders’ interests?