Walker hotting up on Iceland bid

The Iceland founder is reportedly in talks with banks for a £1.5bn loan to buy back his beloved business. Hardly the kind of cash you'd find down the back of the sofa...

by Emma Haslett
Last Updated: 06 Nov 2012
Malcolm Walker, the Iceland founder who has made no secret of the fact that he wants to buy the company back from its current owner, defunct Icelandic bank Landsbanki, has apparently moved a step closer to his goal. Walker’s in negotiations with ‘several banks’ (Goldman Sachs included) for a £1.5bn loan that would allow him to buy the 67% stake being auctioned by the Icelanders. But, while Walker is in pole position at the moment, rivals won’t let him get the frozen food retailer for a song.

Walker, who still owns 25% of the company, is notoriously unenthusiastic about the idea of going down the private equity route to buy the supermarket (which is usually the obvious route for an acquisition of this size). Instead, he’s more likely to opt for a mezzanine debt package, which would reduce the amount of equity he’d have to give away. It’s not the only option being considered by Walker, though. Apparently, one idea is that he’d allow Landsbanki to retain a small amount of its stake, thus meaning he doesn’t have to borrow as much. ‘Show me the money’ is likely to be the resolution committee's response to this. Or, he could just give in and opt for private equity backing…

He might not be happy about the idea, but getting a large backer behind him might be a good idea for Walker: particularly given the size of some of his potential rivals. Because, while Walker has the option of matching any bid made by a competitor, the problem is that, with its 796 stores, Iceland represents a sizeable chunk of pre-fitted out supermarket property – which is increasingly rare, and could mean once the auction gets underway, its price rises fast. Indeed, with competition in the sector continuing to hot up, rivals such as Sainsbury’s, Tesco, Morrison’s and Asda (which proved its growth ambitions when it bought Netto stores when the Danish retailer left the UK last year) are all keen to expand, and are thus particularly interested in Iceland and its property assets.

One thing’s for sure: if the large supermarkets get their hands on Iceland, it will be broken up, and probably shared out among several bidders. Walker insists that his main interest is the company and its employees. In his Retail Week column last week, he wrote that ‘it would not be so bad if the stories were about retailers hoping to get their hands on an iconic and successful British brand’, rather than breaking it up. Very noble. And potentially very lucrative, for someone who’s worth £166m already…

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