Market Report: Home Retail Group on the rise as investors await better bid from Sainsbury’s

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Shares in Home Retail Group raced ahead today as investors bet that suitor Sainsbury’s would have to raise its bid by as much as £500 million to win over the Argos owner’s backers.

The company, which also owns the Homebase DIY chain, jumped 13.5p or 10% to 151.4p as reports revealed majors shareholders of Home Retail would only accept a bid of more than 200p a share, or £1.6 billion.

Neither Sainsbury’s nor Home Retail revealed the price tag of the supermarket group’s rejected November bid, but it is thought to have been in the region of £1.1 billion.

Home Retail lost half its stock market value last year amid questions over the success of its digital transformation and the increasing competition from traditional retailers going online.

The last time the share price was above 200p was in February.

“If [Sainsbury’s] pays over 200p — perhaps 220p — it might get it.”

Cato Stonex of Taube Hodson Stonex

Richard Buxton at Old Mutual Global Investors, which owns close to 6% of the company — after raising its stake last week — told the Sunday Times a bid “has got to start with a ‘2’ in front of it”.

His comments chime with other shareholders who claim an improved offer would have to be significantly higher than the current share price.

Cato Stonex of top 20 shareholder Taube Hodson Stonex said: “If [Sainsbury’s] pays over 200p — perhaps 220p — it might get it.”

FCA filings reveal short-sellers of Home Retail, including Crispin Odey’s Odey Asset Management, covered their bets against the stock when the bid became public on Tuesday. Odey, which was borrowing almost 2.3% of the shares in the hope they would fall, trimmed its short position to 1.62%.

Investors will keep a close eye on trading statements from Sainsbury’s and Home Retail on Wednesday and Thursday respectively for updates on the talks.

It was a slow start to the week for the FTSE 100, up just 3.16 points at 5915.60, but that was a good thing given another slump from Chinese shares. 

Reports that American bidders, including electronics giant Amphenol, are eyeing up a £1.2 billion bid for Laird sparked a 21.5p rise to 350.5p from the FTSE 250 firm’s shares as traders rushed to get a chunk of the Apple supplier.

Imagination Technologies improved 1.5p to 117p after broker Liberum upgraded its rating to Buy in the wake of a 50% share price fall from the iPhone-graphics chips designer.

On AIM, Indian fashion site Koovs gained 0.5p to 24p as it revealed sales in the latest quarter rocketed 210% to £3 million after its marketing push.

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January 12, 2016 |
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