Asda and Morrisons consider Iceland bid

Supermarket Asda is preparing to do battle with rival Morrisons in the £1.5bn (€1.68bn) auction of frozen food retailer Iceland, it was reported today.

Britain’s second-largest chain is said to have appointed City advisers Lazard to help it assemble a bid for the business, which has 750 UK stores and is being sold by the creditors to failed Icelandic bank Landsbanki.

According to the Sunday Times, Asda’s American owner Walmart is keen to grow internationally as it looks to offset flat sales in its domestic market. Walmart has 8,500 stores in 15 countries and recently boosted its position in the UK with the acquisition of stores from Danish discount food chain Netto.

Asda will face stiff competition from Morrisons, which is reportedly on the verge of appointing advisers to lead a bid for Iceland. If successful, Morrisons would nearly triple in size and bring its market share closer to Asda and Sainsbury’s.

The Iceland sale process, however, will not start until September. The retailer transferred to Landsbanki three years ago following the collapse of its then owner, Baugur, which had invested in several high street chains.

Iceland founder, Malcolm Walker, who began the business in 1970 in Oswestry, Shropshire, is also rumoured to be preparing a bid. He holds a 26% stake in the business and has the right to match any bid proposal.

The successful bidder is likely to face regulatory scrutiny as Asda was last year forced to sell a quarter of the stores it acquired in the Netto deal.