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Home Retail Group shares soar as Sainsbury’s is outbid

Shares in Home Retail Group leapt 12%, following an offer of £1.4bn by South African retail group Steinhoff International Holdings [1].

This took shares to a value of 172p at close on Friday, just below the terms proposed by Steinhoff of 175p. The Sainsbury’s offer earlier this month was 167p a share, valuing Home Retail Group at £1.35bn [1].

Sainsbury’s is therefore expected to ask for an extension on the Tuesday deadline to consider an increased bid for the group.

Bruno Monteyne, an analyst at Sanford C. Bernstein, said: “Steinhoff certainly looks like a serious bidder… 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” [2].

Analysts at Exane BNP Paribas said they are expecting the grocer to come back with a higher offer.

Steinhoff are said to be supportive of Home Retail Group’s sale of Homebase to Wesfarmers, which was due to return £200m to shareholders.

In a separate statement, Home Retail Group acknowledged the approach from Steinhoff: “The board is reviewing the Steinhoff proposal with its advisers and will make a further announcement in due course.” Shareholders have been advised not to take action yet, as nothing has been confirmed [3].

Under Takeover Panel rules, Steinhoff have until 5pm on March 18 to make a firm offer.

 

[1] The Guardian. ‘Home Retail Group shares soar as Steinhoff beats Sainsbury’s offer’. theguardian.com

[2] Bloomberg. ‘Home Retail shares jump as company becomes $2bn prize’. bloomberg.com

[3] Telegraph. ‘South Africa’s Steinhoff challenges Sainsbury’s with rival £1.4bn bid for Argos owner’. telegraph.co.uk