Iceland should cut the Baugur cord

The unravelling of Icelandic investor Baugur could be just what frozen food retailer Iceland wanted. While the future of the brands that Baugur has stakes in remains unclear, its only food business Iceland should not be worried.

Iceland founder Malcolm Walker has always been very complimentary about its “cash cow” investor. From his point of view, Baugur left him to run the business, didn’t interfere and backed him up with investment when he needed it.

He once joked that you could list the minutes of a board meeting with Baugur on one side of A4 paper – ie they just wanted to know that the figures were adding up and did not want to be involved in the detail of the business.

But to a certain extent Iceland has been dragged down by the furore surrounding Baugur. At every turn Iceland has always said that Baugur’s shareholding in Iceland is only 13.5 per cent and the grocer is not a subsidiary of Baugur.

Iceland insists the latest Baugur episode will have “zero” impact on the day to day trading of the company and the longer term shareholding of the business is not a concern as the management has a controlling interest.

Iceland is cash rich, it is performing phenomenally well and is in no financial danger. Yet Baugur is something of a noose around its neck, which could lead to worry among its suppliers.

Having put in a£50m bid for Woolworths last year, Walker and his top team are not short of money and they surely have everything in place to buy back Baugur’s shareholding. For them, it couldn’t happen soon enough.

While Walker needed Baugur to put together the takeover bid and the two have worked together harmoniously, it is time the cord was cut and Iceland concentrated on its business.

Walker and his team have successfully returned Iceland to its former glory and the business has only been aided further by the downturn as shoppers seek out value prices and food that won’t go off and be wasted after a couple of days.

Iceland’s suppliers should not be worried, but Walker needs to take full control quickly to stop its name being drawn into the confusion any more.