Woolworths shares suspended, widens rescue talks

Trading in shares of Woolworths Group, the struggling British retailer, were suspended today, while talks continued to save the…

Trading in shares of Woolworths Group, the struggling British retailer, were suspended today, while talks continued to save the business from collapse.

The 99-year-old group, which still sells more sweets than any other British retailer and has top five positions in toys, children's clothing, homewares and entertainment products, confirmed that it remains in discussions regarding the potential sale of its 800-store retail business to restructuring specialist Hilco UK for a nominal sum.
Woolworths said it was also in talks with the BBC regarding the possible sale of its 40 per cent interest in the 2 Entertain DVD publishing joint venture with BBC Worldwide, the broadcaster's commercial arm.

"Whilst discussions in relation to such sales are being pursued with vigour terms have not yet been agreed," the group said in a statement.

"Both sales are subject, amongst other things to the approval of the group's lending banks (Bank of Ireland division Burdale and GMAC). Accordingly, there can be no assurance that a sale of the group's retail business or of its interest in 2 Entertain will be concluded."

Woolworths added that pending the outcome of the talks and the consequent impact on the company's financial position it had requested a suspension in the trading of its shares.

A spokeswoman for Woolworths declined to comment further.

However, an executive familiar with the discussions said the BBC has agreed in principle to pay "more than £100 million" ($153.8 million) for Woolworths' 2 Entertain stake.

Woolworths' pension fund is entitled to the first £50 million of any 2 Entertain disposal deal under an agreement struck between the trustees and the Woolworths board when Burdale and GMAC lent the group £385 million pounds in January. As of August 2nd the pension fund had a deficit of £58.2 million.

The sale of both the retail business and the 2 Entertain holding would leave Woolworths with only a profitable entertainment wholesale distribution business.

Hilco's proposal would see it buy Woolworths' retail division for £1 and take on about £300 million of the group debt. The balance of the debt would be assumed by the rump business.

If the lenders decide not to approve the sales, analysts expect Woolworths' board will place the entire group into administration, threatening the jobs of 30,000 employees.

Ardeshir Naghshineh, Woolworths' largest shareholder with a 10.2 per cent stake, said on Monday the retailer should not be forced into administration but should continue as a going concern.

He outlined a plan to the lenders which would see Woolworths realising some of its assets through the sale of leases to bring in cash. A spokesman for Naghshineh declined to comment.

Woolworths shares were suspended at 1.22 pence, valuing the equity at just £18 million.