Mixed fortunes over Littlewoods

The consortium that Sir David Alliance has assembled to try to buy the Littlewoods empire may have a reasonable chance of success but it is not necessarily good news for all investors.

Shareholders in N Brown, Sir David's mail order company, and Iceland, its frozen food retailing partner, could fare very differently if the bid succeeded. The most obvious measure of City sentiment was the move in yesterday's share prices. N Brown jumped 8p to an all-time high of 274p while Iceland was unchanged at 161p.

For shareholders in N Brown, the effects of the company getting its hands on Littlewoods' mail order business should be good news. The company has built its success on selling clothing to older customers, although it has recently been targeting a younger audience. Buying Littlewoods' home shopping would accelerate that move, increase direct selling at the expense of Littlewoods' agency system and introduce its marketing, logistics and database skills.

N Brown shares have more than trebled over the last five years and analysts are forecasting pounds 31m for the full year, which puts the shares on a rating of almost 20. High, but this is a quality company and could work wonders with the Littlewoods business.

This is less likely with Iceland. Iceland has been struggling with falling margins and competition from the supermarket chains. It also has no experience in running a clothing chain store. With analysts forecasting profits of pounds 74.4m for the full year, this puts the shares on a lowly rating of 10. However, this deal not only looks too much for Iceland to take on but raises questions about management's confidence in the existing business. Sell.