Woolworths chairman Richard North today began explaining in detail to shareholders why the multiple retailer had rejected a £50 million bid for its 815 stores from former Iceland frozen foods boss Malcolm Walker.

North, who is running the show in the month's gap between chief executives, is likely to tell core investors that Walker's sums simply do not add up.

He received some backing from analysts today. One said the rejection of the proposal came as no surprise "as it essentially required Woolworths to pay Iceland to buy it".

He added: "Woolworths thinks this is unacceptable and also thinks that Iceland has undervalued its assets. It's too early to tell if Iceland will come back, but the market will now see Woolworths as even more of a bid target."

Woolworth shares, which have fallen 80% over the past two years, today rose 1.1p to 7.75p.

Walker made his proposal in a letter three weeks ago. He has the backing of Woolworths' 10% shareholder Baugur, the Icelandic retail investment group that took over Walker's Iceland supermarket chain and brought him back in to run it three years ago.

Property tycoon Ardeshir Naghshineh has built a 10.2% stake in Woolworths, and has been rumoured to be putting together a consortium to bid.

When North speaks to other investors over the coming days, he will highlight the hurdles that Walker's offer placed as pre-conditions to buying the 815 stores. In particular, North will stress that Walker insisted on purchasing the business free of all pension liabilities and debt.

Sources close to Woolworths today said that if the retail chain were split off from the rest of the business, its pension liabilities would increase sharply. Said one source: "Effectively, we would have had to pump more into the pension scheme than Walker was offering to pay us."

At the end of the last financial year, Woolworths' pension fund deficit was £48.2 million, but this is likely to have risen with stock-market weakness.

The Woolworths source pointed out that the plans put forward by Walker were not only highly complex but also involved massive renegotiations on the leases of many of the properties occupied by its High Street stores.

Walker was not interested in buying what are widely seen as the most profitable parts of Woolworths - its CD and DVD wholesaling business E.Uk and its video-publishing joint venture with the BBC, 2entertain.

With the departure last Friday of Trevor Bish-Jones, who had been chief executive of Woolworths for five years, the group is without a chief executive for the next month. Steve Johnson, the new chief executive, does not arrive until the middle of next month.

North will stress to shareholders that the recruitment of Jones from DIY chain Focus signals the start of a major turnaround strategy and that they should not be prepared to sell the business on the cheap.