Woolies shares leap on bid talk

SHARES in High Street retail chain Woolworths soared this morning after private equity firm Apax Partners announced it is considering making a bid for the company.

Woolworths shares rose 20%, up 10p at 50½p in early trading after the announcement from Apax, which helped fund the takeover of retail group New Look last year.

City experts believe that a bid by Apax could value Woolworths at around £700m but Apax would have to pay a premium on the current share price if it is to get a recommendation from the Woolworths board and this could see the company valued at close to £850m.

Apax said today that it is still only at the early stage of considering a move but said that if it does decide to proceed it will approach the board of Woolworths to gain its support. There was no immediate comment from Woolworths but the company is not in the best of shape ? it had a tough Christmas season and recently described its performance as 'disappointing' after sales of toys and blockbuster DVDs failed to meet expectations.

{2}Woolworths has also been under pressure from rivals such as Tesco which is muscling into the non-food sector. Supermarkets are increasingly selling items such as CDs, films and toys and they have the purchasing power to outgun Woolworths in key areas.

Like-for-like sales in Woolworths 800-strong High Street stores were 'flat' in the four weeks to the beginning of January, while sales at 'Big W', its out-of-town superstores, and MVC, its specialist entertainment shops, were down by 8% and 4.7%, respectively.

In a statement to the stock market, Apax said: 'Considerations are at a very early stage and there can be no certainty at all that any offer will ultimately be forthcoming.' Apax has a long track record in the retail sector. It was one of the two private equity firms which recently sold DIY retail chain Wickes to builders' merchant Travis Perkins for £950m.