SHARES in Fitzwilton rose sharply on the London market yesterday, although the reports linking British supermarket giant Safeway with a bid for Fitzwilton's Wellworth subsidiary in Northern Ireland were being treated with some considerable caution in both Ireland and the UK.
Fitzwilton shares traded up 10p in London to 57p sterling and in Dublin were being bid at 55p after being bid at 60p in early trading. Turnover levels in London were a minuscule 100,000 shares and dealers said that the 57p sterling price should not necessarily be seen as reflecting the broader market attitude to Fitzwilton shares. Safeway shares rose 11 1/2p to 391p sterling in heavy volume, even though London analysts expressed scepticism about the reports.
Predictably, Safeway refused to make any comment on the rumours of a Wellworth bid - which might involve a price tag of over £150 million sterling. Industry sources have told The Irish Times that Safeway executives have looked closely at Northern Ireland, but more with a view to a joint venture with an existing operator rather than an outright acquisition.
The horrendous planning problems that have plagued Sainsbury in its Northern Ireland expansion have meant that British supermarket groups are thinking twice about investing in greenfield sites and view takeovers or alliances as a better option. Significantly, Wellworth has been to the forefront in objecting to some of the Sainsbury out of town superstore developments.
Some Irish industry sources, however, questioned the logic of a Safeway bid or joint venture with Wellworth. Safeway, as one of the giants of the British retail market has concentrated in recent years on large scale out of town developments. In contrast, Wellworth has publicly stated that it sees its future in town centre and edge of town developments, most of which would be far smaller than the huge out of town complexes favoured by the likes of Sainsbury and Safeway.
The sources have suggested, however, that while Fitzwilton is not actively seeking a buyer for Wellworth, it is open to offers for the supermarket group which forms a major portion of its overall business. Rather than Safeway some sources suggest that Fitzwilton's own 9 per cent shareholder, Dunnes Stores, might be a logical buyer if Wellworth is to be sold by Fitzwilton.
Wellworth had sales of £274 million in 1995, and with operating margins of 7 per cent is thought to have made operating profits of £19.2 million, with pretax profits of £12 million. Dunnes Stores is number three in Northern Ireland with sales of £194 million and pre tax profits of £8.7 million. A combination of the two would present a stern challenge to the number one in the market, the ABF owned Crazy Prices.
When Dunnes took its 9.1 per cent stake in Fitzwilton two years ago, it was suggested that this might be the prelude to a bid for the company. But Fitzwilton chairman Dr Tony O'Reilly made it clear that a Dunnes bid would not be welcome.
Dr O'Reilly, his brother in law Mr Peter Goulandris, and allies control over 50 per cent of Fitzwilton and this grouping as well as the largely British institutional investors would need to be convinced of the logic of a sale to Safeway, Dunnes or anybody else.
The combined Stewarts/Crazy Prices had sales in the year to September 1995 of £394 million and pre tax profits of £11.2 million. Tesco has been periodically linked with a £200 million plus bid for the ABF subsidiaries but as with the Wellworth speculation, this has so far come to nothing.
Analysts in Dublin are also sceptical about the rumours, as a sale of Wellworth would leave Fitzwilton with its holding in Waterford Wedgwood and the Rennicks Engineering subsidiary and nothing else - bar a much improved balance sheet. The money from a sale of Wellworths would clear Fitzwilton's heavy debt and leave the company in a net cash position.
