Hostile Takeover Bid from Dixons Stores Group in 1986

Lukewarm investor feedback to the new Cornerstone Strategy at Woolworths led to changes at the top, with the appointment of new Directors drawn from across the industry. Mair Barnes from the House of Fraser took over as Commercial Director, alongside Mike Sommers at Marketing and Chris Ash. Their challenge was to establish a turnaround formula that could match the exponential growth of sister company B&Q.

Before the ink on their new strategy could dry, it was put to a stern test when Stanley Kalms, the Chairman and MD of Dixons Stores Group launched a £1.8bn hostile takeover bid for Woolworth Holdings. The campaign was managed by his young Finance Director, Gerald Corbett. The ensuing weeks witnessed one of the roughest and toughest takeover battles of the era.

Kalms claimed that Woolworths Holdings was managed by accountants who were driving profits through property sales rather than improving the retailing proposition, particularly at F. W. Woolworth. He claimed that he could do better and would bring his unrivalled retail knowledge to bear on the subject.

Throughout the battle attention focused on Woolworths. Kalms acknowledged that Britain's anti-monopoly laws would probably force him to sell the Comet subsidiary, and described sales and profit progress at B&Q as "acceptable".

Woolworths launched a counter-offensive, lambasting Kalms for mis-managing his previous acquisitions. The Directors argued that Weston Pharmaceuticals, Barclay Fine Chemicals, Dixons Rinck, Barclay & Sons, Ascotts and ACE had all underperformed, and trashed suggestions that Kalms had never closed a store. They went on to note that, while the Dixons man described market conditions as "difficult", newly-acquired Superdrug had made major sales advances in the Woolworth family, in marked contrast to Westons.

The pièce de resistance of the campaign took place on 11 April 1986, when 2,000 Woolworth, Comet and B&Q Managers gathered at the Wembley Conference Centre, with every TV network invited.

In the speech of his life, Geoff Mulcahy declared "We are the independent, unbeatable team. Dixons say we have no retail experience - 30,000 years’ experience that is what we have in the room today. That loyalty, that total commitment to our strategy, that is what Stanley will find he’s fighting against, and that is why investors should reject this inadequate and misconceived offer." Viewers of the evening news saw the huge audience spontaneously rise and applaud for over ten minutes.

As if any reinforcement was needed, both major commercial TV networks carried carefully-crafted advertisements revealing the new-look Woolworths for the first time. In keeping with City Regulations the ads made no mention of the bid battle, but nonetheless packed quite a punch.

Large and small investors chose to give Woolworth Holdings the benefit of the doubt, leaving Stanley Kalms falling substantially short of the required number of acceptances. Three years later, in a rare lapse of judgement, a tit-for-tat takeover bid for Dixons was launched and won shareholder approval, before being over-ruled by the Monopolies and Mergers Commission.

By way of an epilogue, fifteen years later three former Dixons Men took the helm of the demerged Woolworths Group. The Chairman, Gerald Corbett, CEO Trevor Bish-Jones and Operations Director Steve Lewis had all worked for Kalms. And, after seven years of their leadership, the stores vanished from the High Street. The Group had amassed debts of over £300m.