Woolworths rejects takeover offer from Iceland founder

Malcolm Walker, the founder of Iceland Foods, made his offer backed by Icelandic investment group Baugur Group, which owns Iceland and 10% of Woolworths.

Woolworths, which has 815 stores across the UK, said the bid was too low and would have burdened it with pension liabilities.

In a statement Woolworths said the proposal "required the company to retain all the pension liabilities for current and former employees of the retail business. This is unacceptable to the board".

Woolworths issued a profits warning in July and said that it would miss profit forecasts for the year after sales fell 6.7%, in the six weeks to July 26.

Woolworths said that its first half loss would be higher than in previous years and is unlikely to hit its pre-tax profits target of £25m for the year.

The profits warning came a month after the departure of chief executive, Trevor Bish-Jones, was announced in June. He has since been replaced following last week's appointment of Steve Johnson, the former chief executive of DIY retailer Focus DIY.

The Walker/Baugur plan would have seen a break up of the group with the struggling stores split from its wholesale and DVD publishing divisions.

Woolworths shares closed on Friday at 6.65p and were up this morning to 7.75p a share, valuing the business at £113m. A year ago its shares were trading at 24.5p.