THE clinching of the Fitzwilton joint venture with Safeway was welcomed by the market and Fitzwilton shares rose sharply in both Dublin and London. In Dublin the shares were up 3 1/2p to 52 1/2p, while in London 750,000 shares changed hands as the shares rose 5p to 52p sterling.

Once the deal is completed, Fitzwilton will have a 50 per cent stake in the joint venture company which will run the rebranded Wellworth operations in Northern Ireland and the expansion into the retailing market in the Republic.

The biggest impact, however, will be on Fitzwilton's balance sheet where the £67.4 million immediate cash payment from Safeway will transform the group's debt. Currently, analysts are forecasting end 1997 debt of around £131 million for Fitzwilton. This will be almost halved as a result of the Safeway cash payment and will give Fitzwilton a much healthier gearing of under 50 per cent compared to the current gearing forecast of over 90 per cent.

One outcome of the cash injection is likely to mean an increase in Fitzwilton's stake in Waterford Wedgwood. Earlier this year, Fitzwilton did not exercise an option it held to buy a further 3.7 per cent of Waterford Wedgwood from Morgan Stanley for around £23 million. That option has now expired but Waterford Wedgwood can still buy from Morgan Stanley directly. This would take its stake in the crystal and china group to 16.7 per cent.

The deal allows Fitzwilton retain a substantial stake in retailing in Northern Ireland and later in the Republic, while also releasing cash through the Musgrave sale for further investment. Mr Kevin McGoran, chief executive of Fitzwilton, said the firm would remain a narrowly focused industrial holding company "and in the first instance we will be concentrating on the businesses we are in". In addition to Wellworth, these include the minority stake in Waterford Wedgwood and the road sign manufacturer Rennicks.

Fitzwilton, however, will have to bear its fill 50 per cent share of the costs associated with the Safeway expansion in Northern Ireland and the Republic, although the company said yesterday that the profits generated by the Safeway joint venture should allow the joint venture company to finance its development programme "leaving Fitzwilton to pursue other strategic investment opportunities as they arise."

Fitzwilton first took a stake in Wellworth in October 1992 through a 42 per cent stake in a takeover consortium which paid £122 million sterling for the business. Fitzwilton subsequently bought out the venture capital companies which backed that takeover to take its stake in Wellworth to 97 per cent.