Woolworths Limited (ASX: WOW) is believed to have reached out for advice regarding the future of its Big W business.
According to Fairfax Media, sources close to the matter believe Woolworths is in discussions with corporate advisory boutique, Luminus Partners, regarding the potential sale of Big W.
While no formal agreement is believed to have been reached between the two parties, it's believed they have been in talks for "some months", according to the Australian Financial Review.
Will they or won't they?
Speculation over a potential takeover of various segments of Woolworths' business is now commonplace. Masters, one of the company's home improvement businesses has at times been suggested as a worthy target. Even Woolworths itself (i.e. the whole company) is currently believed to be in the crosshairs of two giant private equity firms.
Competing against Kmart and Target, owned by Woolworths' rival Wesfarmers Ltd (ASX: WES), Big W has lost much of its mojo in recent years. The tough competition has been reflected in a poor earnings performance.
A takeover offer for parts of — or all — the company couldn't be ruled out, especially as the Woolworths share price remains under pressure. The Woolworths share price is down roughly 30% since the beginning of 2014.
Combined with a falling Australian dollar, the purchasing power of USA-based private equity firms has increased by around 42% since January 3, 2014, according to my calculations. Therefore, it may only be a matter of time before Woolworths is offered something for at least one of its businesses.
Foolish takeover
In my opinion, a private equity takeover of Woolworths would likely be very bad news for its employees. However, it could be a blessing for shareholders who've sat back and watched the company's share price plunge in recent times.
