Big Food set to be eaten

BIG Food Group today confirmed that it is in bid talks. Shares in the company, which spans Iceland stores to the Booker food business, jumped 10 1/2p to 102 3/4p on the news. The unnamed bidder is considering an offer of 110p a share, valuing the company at £378m.

Baugur, the Icelandic retail group, is the most likely candidate for the bid. It already has a large UK High Street presence through fashion stores such as Oasis and Karen Millen, both acquired in the past year.

Baugur may be linking up with a private equity group and the company‘s management to mount a bid.

Big Food‘s vulnerability to a bid was pointed out after an announcement two months ago of slipping sales and a down beat statement on future trading.

A 22% stake in Big Food is already owned by Baugur. Earlier this week it fuelled speculation it was building up a war chest in preparation for a swoop when it sold its 10% stake in House of Fraser for between £20m and £30m.

City analysts have questioned the underlying rationale behind a takeover. The acquisition of a food-centred business would represent a departure from Baugur's previous strategy in the UK. Although they control 45% of food retailing in their home country, the Icelanders were seen as more likely to expand their presence the clothing market. Earlier this month they registered its interest in bidding for upmarket womenswear chain Hobbs, which has been put up for sale by it's majority shareholder, Barclays Private Capital.

Supermarket groups Somerfield and Wal-Mart-owned Asda have been floated as more appropriate bidders for the struggling Big Food operation, where there have been talks of a buy-out since 2002.