£326m bid for Iceland

The supermarket chain Iceland was poised to be separated from its parent company Big Food today after the group received a £326 million offer from Icelandic retailer Baugur.

The supermarket chain Iceland was poised to be separated from its parent company Big Food today after the group received a £326 million offer from Icelandic retailer Baugur.

A consortium led by Baugur said it would split off Iceland and bring in a new management team led by the businessman who founded it 25 years ago.

Shareholder approval is still required for the takeover of Big Food, which also owns the cash-and-carry chain Booker and Woodward Foodservice.

The consortium - called Giant BidCo - is 43% owned by Baugur, which has been rapidly increasing its presence on the UK high street.

Scottish property entrepreneur Tom Hunter, who recently sold stakes in Bhs and Selfridges, also owns 13.9%, while Kevin Stanford, founder of the Karen Millen fashion brand, has 8.9%.

Under the deal, Iceland would be sold on to investors within the Giant BidCo consortium for £150 million and would be run by a team led by Malcolm Walker.

Mr Walker started the chain from a market stall 25 years ago and left in 2001 shortly before its merger with Booker.

Giant BidCo said that in an "increasingly competitive" UK market, it believed it would be more appropriate to take the businesses private.

It said Iceland and Booker were well placed to take advantage of the trend by large supermarket chains to move into the convenience sector - but that it would require investment to do this.

Customers favoured everyday price cuts over the special price promotions favoured by Iceland, making trading tougher for the chain.

"The Big Food Group directors expect this difficult competitive landscape to persist," it added.

Baugur, which already owns 22% of Big Food, clinched a £120 million takeover of Karen Millen in June and also owns womenswear stores including Coast, Whistles, Oasis and MK One.

Big Food was formed in 2000 through the merger of Iceland and Booker. It trades from 950 sites - including 750 Iceland stores - and employs around 30,000 people.

Last month it revealed like-for-like sales at Iceland fell 3.4% in the five weeks to November 5, following on from a tough summer when poor weather depressed demand for ice cream and barbecue products.

Giant BidCo said it had not made any decision about the future of the company's executive directors, but said none had announced their resignation following the news.

The employment rights of existing Big Food staff would be fully safeguarded, it added.

The deal will go ahead in February if it is accepted by shareholders.

Shares lifted 2% today to 94p, just below the 95p-a-share offer price. An initial offer of 110p was made at the start of takeover talks in September, but that was later revised due to tough trading conditions.