The financial press has speculated that frozen food and grocery retailer Iceland, with a circa 2% UK market share, is up for sale.

The price is mooted at between £1bn and 2bn: we believe it is worth closer to the former. If Iceland is put up for sale it raises important questions, the most critical is, will it go the same way as Gateway, Safeway, Kwik Save and Somerfield have in recent years?

Iceland has recovered magnificently from the lows it experienced under the worst days of the Big Food Group when founder Malcolm Walker was out of the business. Walker has reportedly tried to take control of the business in recent times and his team may yet seek to again take control. Equally, Iceland may be acquired by competitors hungry for additional space.

We believe that virtually all of the major food retailers in the UK will have run the slide rule over the Iceland estate, which is in the main leasehold, small-sized, varied in location and, of course, dominated by chillers and freezer cabinets with a distribution network and fleet positioned for a primarily frozen and chilled proposition.

If Walker and his team do not take control of Iceland the mechanism for its acquisition could be complex and messy. Walker and co have about a quarter of the equity, and if they do not wish to sell their stake then one has to question the desirability to other parties of a significant minority investor.

However, for the sake of argument, if we assume that the whole of Iceland is sold then we contend that each of the big four could bid for majority control. Working with the Competition Commission to meet regulatory requirements in localities across the country, a whole raft of subsequent deals would most probably follow, as we’ve seen elsewhere.

With each of the big four now embracing small stores, Asda and Morrisons would probably be able to retain most of the acquired stores. However, the Co-op, Lidl, M&S and Waitrose would, we contend, be interested in many outlets.

This is where things become more difficult and controversial, because we believe that Iceland would more or less disappear under a carve-up between its rivals, with the mass sale of thousands of freezers, while the impact on the Deeside economy could be especially challenging.

Therefore, if Iceland is acquired, it could simply melt away.

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