£326m bid for Iceland

British supermarket chain Iceland was poised to be separated from its parent company Big Food today after the group received a £326m (€474.5m) offer from Icelandic retailer Baugur.

A consortium led by Baugur said it would split off Iceland and bring in a new management team led by the businessman who founded it 25 years ago.

Shareholder approval is still required for the takeover of Big Food, which also owns the cash-and-carry chain Booker and Woodward Foodservice.

The consortium – called Giant BidCo – is 43% owned by Baugur, which has been rapidly increasing its presence on the UK high street.

Scottish property entrepreneur Tom Hunter, who recently sold stakes in Bhs and Selfridges, also owns 13.9%, while Kevin Stanford, founder of the Karen Millen fashion brand, has 8.9%.

Under the deal, Iceland would be sold on to investors within the Giant BidCo consortium for £150m (€218.4m) and would be run by a team led by Malcolm Walker.

Mr Walker started the chain from a market stall 25 years ago and left in 2001 shortly before its merger with Booker.

Giant BidCo said that in an “increasingly competitive” UK market, it believed it would be more appropriate to take the businesses private.

It said Iceland and Booker were well placed to take advantage of the trend by large supermarket chains to move into the convenience sector – but that it would require investment to do this.

Customers favoured everyday price cuts over the special price promotions favoured by Iceland, making trading tougher for the chain.

“The Big Food Group directors expect this difficult competitive landscape to persist,” it added.

Baugur, which already owns 22% of Big Food, clinched a £120m (€174.7m) takeover of Karen Millen in June and also owns womenswear stores including Coast, Whistles, Oasis and MK One.