Bid talk helps HRG avoid the slump

The markets' severe plunge may have shown few signs of abating yesterday, but the return of talk that its Argos business could attract buyers meant Home Retail was one of the few stocks finishing ahead.

As the FTSE 100 suffered a fourth straight session of three-digit falls for the first time ever, the retailer – which also owns Homebase – managed to power forwards 3.9p to 123.7p on the mid-tier index after Morgan Stanley talked up its takeover potential.

Pointing out the company has lost over 75 per cent of its share price since peaking at 497.5p in 2007, the broker's analyst Geoff Ruddell said that "given how lowly Argos and Homebase are currently being valued by the market, we think some form of takeout remains a very plausible scenario".

Bid rumours have often appeared around the group, with one frequent tale linking it to a potential approach from Walmart. Mr Ruddell suggested Argos would "strategically, be a very attractive asset" for the US owner of Asda, as it would, he said, to the other UK supermarket chains.

Highlighting the fact the broker was "turning buyers for the first time ever," Mr Ruddell upgraded Home Retail's rating to "overweight", saying that "both Argos and Homebase remain viable businesses and are far from worthless, which is what [its] current share price is very close to implying". The analyst added that the strong condition of its balance sheet meant it was in a better condition than a number of its rivals to wait out the current economic pressures facing the high street.

Source : Toby Green - The Independent
www.independent.co.uk/news/business/sharewatch/market-report-bid-talk-helps-home-retail-avoid-the-slump-2334189.html