Home Retail Group shares rose in early trading, after a takeover of the Argos-stores owner turned into a £1.4-billion ($2-billion) contest.
Steinhoff International Holdings Ltd, the owner of Conforama furniture stores in France and Bensons Beds in the UK, said that it plans to make a 175-pence-a-share cash offer for the British retailer, topping a bid from supermarket chain J Sainsbury Plc.
Home Retail gained as much as 12 per cent to 172.5 pence, the highest since 3 July. Steinhoff’s bid came days before a deadline for Sainsbury to make a formal proposal, having previously reached agreement on the terms of a cash-and-share offer worth about 167 pence a share. The grocer now needs to raise its bid if it wants to win the contest.
"Steinhoff certainly looks like a serious bidder," Bruno Monteyne, an analyst at Sanford C. Bernstein, said in a note. "Sainsbury’s might be keen to avoid a bidding war, but we would expect them to match the Steinhoff bid, and hope that the fact they are further down the line on due diligence will mean the board will accept their offer."
Sainsbury has yet to formally respond to Steinhoff’s proposal. Analysts at Exane BNP Paribas said that they expect the grocer to come back with a higher offer. The shares fell 0.9 per cent to 258.7 pence in early London trading.
The bidders are vying for control of a business that operates more than 800 Argos shops, selling everything from jewellery to televisions. Home Retail would further increase Steinhoff’s presence in Europe, where it gets more than half its 135 billion rand ($8.8 billion) of sales from operations in the UK, France and Germany.
Steinhoff gained as much as 4.6 per cent to €4.71 in Frankfurt, where the company has had its primary listing since December. The listing was moved from Johannesburg to reflect the growing importance of Europe to a company that’s now based in Amsterdam and has a market value of about €18 billion ($20 billion).
The furniture retailer said that its offer comprises 147.2 pence a share in cash, plus a 2.8-pence dividend and 25 pence to reflect Home Retail’s sale of the Homebase UK home-improvement chain to Australia’s Wesfarmers.
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