logo-loader

Sainsbury's Argos ambitions endangered by Benson's Beds' owner's approach

Published: 10:28 22 Feb 2016 GMT

Ilkston-7041
Steinhoff's indicative all-cash offer looks more attractive than Sainsbury's shares plus cash

Frankfurt-listed retailer Steinhoff International has made a late bid to gate-crash the Sainsbury/Home Retail engagement party.

Steinhoff, which owns the Benson's Beds and Harvey's retail brands in the UK, confirmed after the market closed on Friday it had made a bid approach to Argos-owner Home Retail (LON:HOME) that could derail the proposed Sainsbury (J) (LON:SBRY) takeover.

Sainsbury's is currently performing due diligence on Home Retail, having provisionally agreed to buy the company for about £1.3bn, and has until 5.00pm on Tuesday, 23 February, to announce a firm offer or walk away.

Sainsbury's offer is currently worth 165.3p per Home Retail share, including the proposed 25p per share capital return and the 2.8p final dividend announced by the Home Retail board, whereas Steinhoff has indicated it is prepared to offer 147.2p cash per share which, together with the capital return and final divi makes its offer worth 175p per share.

Home Retail's shares climbed 18.7p to 172.3p on Monday morning, whereas Sainsbury's shares fell 4.4p to 256.7p.

Home Retail Group (HRG) is in the process of offloading its Homebase chain, and Steinhoff confirmed it is supportive of this disposal.

It offered the usual caveats that there is no guarantee that it will make a formal bid for Home Retail and reserved the right to offer less than 147.2p per share should it decided to launch a takeover attempt.

The board of Home Retail said it is reviewing the Steinhoff proposal and advises shareholders in the meantime to take not action.

Broker Cantor Fitzgerald said Sainsbury's is likely to look for an extension to the “put-up or shut-up” period and expects it to at least match the Steinhoff offer which, being all cash, is more attractive than the UK retailer's offer of 0.321 Sainsbury's shares plus 55p cash.

“For Steinhoff, the offer is about increasing market presence in Europe, where the company already has relatively strong base in furnishings, bedding and electricals through its ownership of Benson Beds, Harvey's and Conforama in France. In contrast, Sainsbury (SBRY LN – HOLD – TP 270p) is looking to enhance Argos’s expertise in fulfilment at a time when there has been explosive growth in m-commerce and ‘click and collect’,” Cantor Fitzgerald's retail analyst Freddie George said.

Shore Capital said it was not surprised that a counter-bid was on the cards, as Sainsbury's predominantly equity-based bid put the Argos business in play.

“Indeed, whilst there are no signs of activity, we felt that Asda (Wal-Mart, WMT, NR CNP) should have dusted off the Argos file with the business in-play,” Shore's Clive Black said.

Sainsbury's has been very opportunistic, creative and entrepreneurial with its bid for HRG to our minds, including the utilisation of the debtor book and the combination with Sainsbury's Bank; however, Sainsbury's management has also repeatedly stated that it will not overpay for the Argos business,” Shore noted, adding that there is still the possibility that the Competition & Markets Authority “may yet poke its nose into any firm Sainsbury's offer” for Home Retail.

FTSE rises ahead of Easter weekend, JD Sport gains on upbeat outlook -...

The FTSE 100 gained on the final morning of this shortened Easter trading week. Festive cheer was limited though, as Thames Water confirmed shareholders would not provide it with a £500 million rescue package, prompting speculation over the London supplier’s future. On a more positive...

1 hour, 43 minutes ago