Woolworths plunges on news it may sell stores

Wed Nov 19, 2008 4:33 AM EST

business, eu, britain, bid, woolworths, woolworths-group-plc

Woolworths Group PLC's shares plunged 38 percent Wednesday after the company confirmed it is considering selling its retail business.

"The board can confirm that it is in preliminary discussions regarding a possible offer for the retail business," the company, hit hard by a slowdown in consumer spending from the economic downturn, said in a statement.

"There can be no assurance that any offer will be forthcoming," it added

Woolworths declined to name the possible buyer of its chain of 815 stores, which sells goods including electrical appliances, home wares and computer games.

Britain's Times newspaper said Woolworths was in discussions with Hilco UK Limited, a firm that buys underperforming retail businesses and turns them around for profit. The sale price would be a nominal 1 pound ($1.50), according to the report. Hilco declined to comment.

In August, Woolworths rejected a 50 million pound offer for its retail division from Iceland Foods Ltd.

Shares in Woolworths were suspended for around 20 minutes at the start of trading on the London Stock Exchange, pending the announcement about the sale talks.

The stock ended down, plummeting by 38.3 percent to 2.35 pence ($0.04). In the last year, the retailer's share price has fallen by more than 80 percent.

Woolworths "needs to deal with someone if it wants to survive," said Sam Hart, a retail analyst at Charles Stanley Stockbrokers.

If Woolworths is able to sell its retail arm, the company would be left with its two smaller units: entertainment products distributor EUK and BBC program distributor 2 Entertain.

In the last financial year, which ended in April, those two businesses accounted for roughly half of Woolworths total revenue — or 1.4 billion pounds.

Britain's Woolworths was founded in 1909 as part of the U.S. chain, but the two no longer have any link. The company is also not related to Sydney-based Woolworths Ltd. or South Africa's Woolworths Holdings Ltd.