Bhs's Philip Green refuses to rule out hostile Woolworths bid after talks fail

Internal links

Outlook

Philip Green, the billionaire entrepreneur owner of Bhs, yesterday left hanging the prospect of a hostile bid for Woolworths after talks on a possible merger of the two retailers broke down.

Shares in Woolworths dropped 5.7 per cent to 45.75p after the news, valuing the company at £644m. The price had jumped 21 per cent in the three days leading up to the announcement and has almost doubled since Woolworths' demerger at 25p a share from Kingfisher last August.

Mr Green declined to rule out making an offer for Woolworths, saying "I can't rule anything in or out," but his immediate plan was "to let the dust settle". Analysts said they thought it was unlikely that Mr Green would be interested in bidding for Woolworths.

The two sides gave conflicting stories of the events surrounding the talks.

Mr Green said he was approached about a merger by Woolworths in mid-May before meeting its chairman, Gerald Corbett. He said Woolworths ended the discussions before any financial information was disclosed. "It begs the question: why did they phone me in the first place?", Mr Green said.

A spokesman for Woolworths, however, said Mr Green invited Mr Corbett to a lunch that was also attended by Bhs chief executive, Terry Green, who is leaving at the end of the month.

Initially the businessmen discussed the possibility of setting up a clothing supply joint venture but the talks progressed to the idea of a merger, the spokesman said. He said that after the lunch Woolworths and its financial advisers investigated the merits of Woolworths buying Bhs from Mr Green.

After a subsequent meeting between Mr Corbett and Mr Green, the Woolworths chairman decided the deal would not happen, the spokesman said, adding Woolworths has not received expressions of interest from any other parties.

Woolworths said its priority was to implement its recovery plan. "After due consideration of the potential benefits of a merger, the board does not believe that such a merger, with its attendant risks and uncertainties, would be in the best interests of shareholders."

The board is in the middle of a recovery plan to turn around the business and deliver shareholder value. The first phase, to cut the level of debts and stock inherited at the time of the demerger, has been completed. The company has beefed up its management with the appointment of Trevor Bish-Jones, as chief executive, and improved the operational performance of the business. "Phase two of the recovery plan is under way with management now focusing on profit recovery," said Woolworths, which made a £46.4m loss last year.

Mr Green is one of the richest and most colourful characters in retailing. He bought Bhs for £250m two years ago after ditching an audacious attempt to buy Marks & Spencer for £11bn.