The source confirmed that Morrisons was "seriously looking" at Iceland after its owners officials responsible for the winding up of Icelandic bank Landsbanki put its 67% stake up for sale earlier this month.
But he added that Iceland CEO Walker, who has a 23% share of the business and would be entitled to match any offer, would end up triumphant.
"You have to ask why a trade buyer would want to go through a very expensive and time-consuming bid process, with all the due diligence and anti-trust issues, only for Walker to come in, match the bid and walk off with it."
The sale was likely to be a long, drawn-out affair with the bidding process not officially kicking off until September, followed by months negotiating regulatory hurdles, he added.
Morrisons is not the only supermarket understood to be running the slide rule over Iceland's 776 stores. Asda has been linked to a deal, while Sainsbury's is believed to be interested in some sites. Most experts believe competition concerns would prevent Tesco from acquiring more than a few stores.
The source's comments were echoed by Walker himself. Speaking exclusively to The Grocer this week, the Iceland founder was bullish about his chances of retaining control of the business, while dismissing those of his rivals.
"This speculation about Sainsbury's being interested in a break-up; they can clear off, they'll never get a look in," he blasted. "I am not about to give all my competitors our numbers, but where is the value in a break-up? There is inherent value in this business. The number being quoted in the papers is £1.5bn that is £3m per shop. It sounds a lot if they are just going to convert them into something else. And why would potential buyers pay a top price just for sites?"
Most experts believe a trade bidder such as Morrisons would have no interest in retaining the Iceland fascia or frozen discounter's operating model, which, along with the issue of Walker's remaining stake, would also discourage them from bidding. "Is Morrisons going to run it as Iceland or even its own frozen format? I don't think so," said Evolution analyst Dave McCarthy. "This would make it a very tough conversion job. And the stores are also in the wrong locations," he added.
Deal or no deal: How £1.5bn for Iceland stacks up
Cost: £1.5bn (estimate)
Price per store: £1.9m (based on 100% of chain)
Turnover multiple: 0.7
Pre-tax profit multiple: 11.1
Cost to Asda: £778m
Price per store: £4m
Turnover multiple: 1.1
Profit multiple: 34
Cost to The Co-op: £1.57bn
Price per store: £1.8m
Turnover multiple: 0.4
Profit multiple: 6.7
Cost to Morrisons: £3bn
Price per store: £6.3m
Turnover multiple: 0.3
Profit multiple: 7.5
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