Home Retail Group and Sainsbury’s reach agreement on financial terms

After revealing earlier this month that an approach last year was rejected, the supermarket has offered the equivalent of 161.3p a share for the retailer.

The offer represents a 63% premium to Home Retail's share price on 4 January.

A deal will depend on the sale of Homebase DIY chain that Australia's Wesfarmers has agreed to buy for £340m.

Sainsbury's had until 5pm Tuesday to make an offer for Home Retail.

It agreed a three-week extension under takeover rules to carry out due diligence on the Argos owner and now has until 5pm on 23 February to announce a firm bid.

Under the cash-and-shares deal, Home Retail shareholders would receive 0.321 new Sainsbury's shares and 55 pence in cash for each share.

To reflect the proceeds of the Homebase sale, investors would also get about 25 pence per share and payment of 2.8 pence in lieu of a final dividend.

Home Retail shareholders would own about 12% of the combined group if a deal progresses.

Source : BBC News
www.bbc.co.uk/news/business-35469616

Text from the announcement:

"The Possible Offer implies a value of approximately £1.1bn for Home Retail Group’s share capital, based on the closing price of Sainsbury’s shares on 1 February 2016. The Possible Offer and Proposed Capital Returns together imply a value of approximately 161.3 pence per Home Retail Group share, based on the closing price of Sainsbury’s shares on 1 February 2016, and a value of approximately £1.3bn for Home Retail Group’s share capital."

See the full publication here  

Source : Home Retail Group Press Release
www.homeretailgroup.com 

Analyst View:

Connor Campbell, a senior market analyst at www.spreadex.com gave us his views:

"The saga of one of the more intriguing M&A deals took its latest twist this week, with Sainsbury’s making a fresh £1.3 billion bid for the beleaguered Home Retail Group. Whilst both stocks are suffering under the current macro-malaise, it appears that the supermarket’s investors may still be sceptical about the move, Sainsbury’s falling over 3% despite comments from CEO Mike Coupe stating that the company was trying to ‘future-proof’ itself. It would seem, however, that Argos (the more troublesome of Home Retail Group’s big two, the other being Homebase) needs a lot of work before it can be called ‘future’ anything."

Source : Insight DIY