Morrisons eyes Iceland takeover for up to £2b

London: Supermarket chain Morrisons is weighing a possible bid for frozen food chain Iceland which is expected to change hands for up to £2 billion (Dh11.84 billion) this summer.

A fortnight ago Landsbanki, the failed Icelandic bank and the retailer's biggest shareholder, hired investment banks UBS and Bank of America Merill Lynch to find a buyer for its 67 per cent stake. Morrisons is also close to appointing advisers to assess Iceland, setting the scene for a hotly contested auction.

Iceland's chief executive and founder Malcolm Walker, who along with management owns 26 per cent, has the right to match any offer for the company.

Buying Iceland, which made profits of £184.2 million on sales of £2.2 billion last year, would be the most aggressive move yet by Morrisons chief executive Dalton Philips to catch rivals since he took over the smallest of the four main grocers a year ago.

He has pulled off a series of small deals, including a £32-million investment in US internet grocer FreshDirect and the £70-million acquisition of baby goods retailer kiddicare.com.

But with officials winding up Landsbanki hanging a price tag of between £1.8 billion and £2 billion on Iceland, this would be in a different league. A spokeman for Morrisons declined to comment.

Any takeover by a member of the big four would not be plain sailing as it would attract the attention of the competition authorities and potentially result in the purchaser being ordered to sell hundreds of stores. Most recently Asda was forced to sell 25 per cent of the stores it acquired from its £800-million takeover of discount rival Netto.

No break-up

Insiders at the frozen food specialist insisted a break-up of the near 800-strong chain was not on the cards. Landsbanki inherited its shareholding in Iceland Foods from collapsed retail investment group Baugur, a situation that was further complicated by the failure of the bank itself.

The investment is now marshalled by its resolution committee and is one of a number of former Baugur investments including Hamleys and Goldsmiths owner Aurum that are said to be on the block. Last week the committee said: "According to UBS and Bank of America Merrill Lynch, market conditions are favourable and it is therefore advisable to commence the sale process."