Woolies to face tough ride after demerger

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Shares in Woolworths, the retailer being demerged from Kingfisher, will be priced below initial expectations when they begin to trade next week, according to spread-betting firms and fund managers.

Cantor Index, which runs a grey market in Woolworths stock, yesterday set a price of between 25p to 27p a share, having come down from an initial price of between 34p to 37p over the past three weeks.

UBS Warburg, an adviser on the demerger, had last month estimated a fair value of between 30p to 40p a share for Woolworths, or £400m to £550m.

At 25p a share, the retailer would be worth only £350m, despite annual sales of £2.5bn. Woolworths' advisers will decide the level at which shares will begin to trade on 28 August.

David Buik, of Cantor, said: "Punters are concerned that until it produces a chief executive who can change Woolworths, it has nowhere to go. We have seen nothing but sellers."

Woolworths, which is chaired by Gerald Corbett, does not expect to appoint a chief executive until next year.

Simon Shaw, a fund manager at Clerical Medical, said Woolworths shares would suffer from both technical factors and its operational difficulties, including its overstocking problem. He said many investors in the FTSE 100-listed Kingfisher would not want to hold shares in a mid-cap retailer such as Woolworths.

Andrew Kelly, of Scottish Value Management, said investors had shown little interest in Woolworths. He said: "It's not an obvious growth play in the retail sector. It's difficult to see how things could change there without a chief executive."