City analysts predict the Big Food Group's newest shareholder Baugur will mount a full takeover bid for the company in the next year.
The Icelandic retailer, which has built up a 14.99% stake in BFG, "is looking at possibilities in the UK market and will see what happens," said a spokesman.
It was forced to pull out of a joint bid for clothing giant Arcadia earlier this year.
But analyst Mike Dennis of CAI Cheuvreux said: "This is not co-operative or strategic. Baugur worked with former Booker management on the Arcadia deal. It must have a good idea of the value of Booker." He said if Baugur bought BFG, it could spin off the Booker business, possibly through a management buyout. Arcadia chief executive Stuart Rose and executive director Charles Wilson, formerly of Booker, could be in the frame.
Dennis added: "Stuart Rose could buy Booker back, making a handsome profit."
But an analyst cautioned: "Of the three parts of BFG, Booker is where most of the value lies. BFG will not be keen to sell off the bit with a bright future."
City sources suggested that following a successful takeover, Baugur could use Iceland's 700-plus sites to introduce its Bonus general merchandise format to the UK, which it has already exported to America. One analyst commented: "The Iceland brand won't be a loss on the high street Â it has already been diluted with Extra and Iceland.co.uk formats."
But another pointed out that Baugur was not in good shape for expansion as it had just issued a profit warning and lost its chief executive. But he added: "The key thing is that this is the first external vote of confidence BFG has had in a long time."
Big Food Group chief executive Bill Grimsey said in a statement: "Baugur has recognised the inherent value within The Big Food Group and has taken the opportunity to buy a significant stake."
Taylor Nelson Sofres data indicates Iceland has a 2% share of the grocery market in the 12 weeks to October 13 2002, with sales down 9% on the same quarter in 2001.
n Iceland has appointed Nick Canning as its new marketing director, replacing Sara Jamison.