Woolies crash as bid talks end

SHARES in Woolworths dived this morning as the City reacted to news that venture capital outfit Apax has abandoned its £837m bid for the company.

Woolies' shares lost 30% of their value in early trading, dropping 16p to 39p despite an assurance from chief executive Trevor Bish Jones that there were no 'black holes' at the retail group. At 39p, Woolworths is now worth just £593m which, to put it into context, is only £26m less than the amount Tesco paid in tax.

Traders said they were trying to assess why Apax walked away. The firm's offer would have been pitched at just over 58p a share.

Bish Jones issued a robust defence of Woolworths' position, insisting: 'I don't know what has gone on over their side of the fence but it says something about them and not about us. Business has got a little worse since January, but we had a clean set of numbers and there are no black holes. We had a clean set of figures and they were audited, so I think there may have been some dodgy assumptions in their business model.'

Some analysts suggested that Apax's withdrawal may mark the end of the private equity houses' appetite for retail takeovers.

Bish Jones said that since the results the group had received 'credible' expressions of interest in its loss-making MVC entertainment operation which has been put up for sale, and cash from the disposal of Big W sites was in line with expectations.

He said the board was satisfied there is no further information that needs to be disclosed with regard to the group's cash position.

'We believed it was our duty to allow Apax to put an offer before shareholders, but we always warned there might not be a bid and they have failed to deliver,' he said.

An Apax spokesman said only: 'In the course of due diligence, Apax has been unable to confirm certain key cash items.' It is also thought to have been unnerved that no other bidder had come forward to look at Woolworths' books.

Woolworths chairman Gerald Corbett said: 'We always knew it would be difficult to deal with a venture capitalist. But at 58p, we had to give them a chance. They've had their chance and gone away. We were perfectly okay two months ago and we'll be perfectly okay now.'

Last month, Woolies unveiled like-for-like sales in its core Woolworths chain were down 1.3% in the year to 29 January.

City observers also pointed to the large number of sizeable deals that Apax is already involved in, including bids for Somerfield and HIT Entertainment.