FITZWILTON shares rose sharply on the Dublin market yesterday, as attention continued on a possible sale of all or part of its Wellworths supermarket subsidiary to the British group Safeways.
In Dublin, Fitzwilton dealt up as high a 58p before closing on 55p, a rise of 8p on the day, while in London the shares reached a high of 62p sterling before settling on 58p sterling. The sharp rise in Dublin is essentially a catching up exercise on the previous day's dealing in London when Fitzwilton shares dealt up strongly.
Both Fitzwilton and Safeways have continued to adopt a "no comment" policy on the reports but there is no doubt that the reports of a link up between the two companies are being taken far more seriously than they were when the story first broke late on Tuesday night.
Industry sources believe that rather than going for a full acquisition of Wellworths, Safeways may be negotiating a joint venture arrangement with Fitzwilton which would see 50 per cent of Wellworths sold to Safeways for around £100 million sterling.
The attraction for Safeways is that it would allow it to build up a substantial presence in Northern Ireland without having to endure the tortuous planning difficulties encountered by Tesco and Sainsbury for their proposed superstore developments on out of town sites.
For Fitzwilton, the sale of half of Wellworths would mean sufficient cash would be released to eliminate the group's debt forecast at £94 million at the end of 1996. It would also mean Fitzwilton would retain a substantial stake in a profitable supermarket group which would benefit from the buying power of a supermarket giant such as Safeways.
Industry analysts believe that Safeways buying power could allow Wellworths to cut its prices by up to 5 per cent without a reduction in margins, and allow Wellworths to compete more aggressively on price against Stewarts/Crazy Prices and Dunnes Stores.
In the year to March 1996, Safeways had pre tax profits of £429.4 million sterling on sales of £6 billion. In the half year to the end of last October, the group had pretax profits of £228.2 million on sales of almost £3.5 billion sterling.
