Investor anger at Argos snub
ARGOS owner Home Retail Group is facing a shareholder revolt after it dismissed a £1bn approach from Sainsbury’s.
Investment firm Schroders and hedge fund Toscafund, who control almost a quarter of HRG stock, are furious at not being consulted regarding Sainsbury’s approach, which was made in November.
They believe there is logic to Sainsbury’s snapping up the owner of Argos and Homebase.
Martin Hughes, f ounder of Toscafund, said: ‘ Leading shareholders of Home Retail are sympathetic to Sainsbury’s approach. They are unhappy the board of Home Retail did not consult prior to rejection.’
He went on to say there were cost savings that could be made of as much as £100m a year.
It is understood both Schroders, which is the biggest shareholder with an 18.6pc stake, and Toscafund with 5.08pc, are annoyed with the board of directors of Home Retail.
The revolt will be helpful for Sainsbury’s which surprised the stockmarket with its cash and shares approach.
It is considering its next step after being rebuffed.
Experts believe that this will lead to an improved offer.
While Sainsbury’s did not reveal the value of its approach, analysts suggested it would have been between £1bn and £1.3bn.
Home Retail Group said it had ‘ rejected the approach, which undervalued Home Retail’.
Not all analysts saw the logic of the deal.
Tony Shiret, an analyst at Haitong Research, said: ‘ The news that Home Retail Group received and rejected an offer from Sainsbury comes both as a shock and a reminder of the weakness of UK Food Retailers and the desperation embedded in their strategic thinking.
‘Why else would anyone countenance adding Amazon to their list of major competitors and take on 840 low-margin Argos retail outlets and 250 or so Homebase units that they thought would be a good idea to get rid of in 2000?’
Shares in Home Retail jumped 41pc yesterday while Sainsbury’s stock slipped more than 5pc. The logic behind the deal would see Argos counters open inside Sainsbury’s stores, while customers who go in to Argos’s own outlets would be able to buy Sainsbury’s clothing and household goods.
They would not be able to buy food.
Supermarkets and fashion chains have been facing stiff competition from online players, which are able to cut costs to drive down prices because they do not have a large store network.
Discounters such as Aldi and Lidl have also launched a fierce price war causing the grocers more pain.
An Argos and Sainsbury’s combination could bring cost savings and would most likely see a raft of Argos stores close if in the same location as a Sainsbury’s.
Argos, which has 840 shops in the UK and a fleet of trucks and stateof-the art technology, is able to deliver items to customers within hours of taking an online order. This is quicker than most other retailers.
Speed of delivery has become a key selling point for firms, with Amazon now able to deliver within one hour in some parts of the UK.
Sainsbury’s statement to the stockmarket yesterday did not mention Homebase.
This led many analysts to predict that if the deal goes ahead the supermarket may well sell the DIY chain for a second time.
The DIY chain was originally part of Sainsbury’s but it was offloaded in 2000 for £969m.