Shares of Woolworths Limited (ASX: WOW) have soared more than 5% today following speculation that it could be the target of a huge takeover.
An article published by News Corp this morning suggested rumours are swirling that private equity is circling the embattled retail giant, which in addition to supermarkets owns brands such as Big W, Masters, Dan Murphy's and more.
Although its shares are currently worth around $35 billion, News Corp believes private equity firm KKR may be sizing up the giant.
"Rumours running through the market yesterday were that KKR… is now putting together a bid which might be almost ready for the Woolworths board to consider," the article read.
A lower dollar would make an Australian acquisition less costly for the U.S-based multinational.
KKR, which has a history of buying and holding businesses for a short time before returning them to public markets, may seek to separate Woolworths' underperforming business units before selling them.
Should you buy Woolworths shares?
Personally, I find it concerning that unfounded rumours can make a $35 billion company's share price jump 5% in a single day. Despite being happy that my Woolies shares are worth more today than yesterday, the rumours could prove untrue and some investors will no doubt be left high and dry.
Long-term Foolish investors shouldn't get caught up in short-term speculation. As always, be cognisant of the risks in any investment you make by approaching it with prudence and diligence.
I recently wrote an in-depth article on Woolworths here.
