Home Retail Group Plcshares rose in early trading after a takeover of the Argos stores owner turned into a 1.4 billion-pound ($2 billion) contest.
Steinhoff International Holdings Ltd., the owner of Conforama furniture stores in France and Bensons Beds in the U.K., said late Friday it plans to make a 175 pence-a-share cash offer for the British retailer, topping a bid from supermarket chain J Sainsbury Plc.
Home Retail gained as much as 12 percent to 172.5 pence, the highest since July 3. Steinhoff’s bid came days before Tuesday’s deadline for Sainsbury to make a formal proposal, having previously reached agreement on the terms of a cash-and- share offer worth about 167 pence a share. The grocer now needs to raise its bid if it wants to win the contest.
“Steinhoff certainly looks like a serious bidder,” Bruno Monteyne, an analyst at Sanford C. Bernstein, said in a note. “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.”
Sainsbury has yet to formally respond to Steinhoff’s proposal. Analysts at Exane BNP Paribas said they expect the grocer to come back with a higher offer. The shares fell 0.9 percent to 258.7 pence in early London trading.
The bidders are vying for control of a business that operates more than 800 Argos shops selling everything from jewelry to televisions. Home Retail would further increase Steinhoff’s presence in Europe, where it gets more than half its 135 billion rand ($8.8 billion) of sales from operations in the U.K., France and Germany. Steinhoff gained as much as 4.6 percent to €4.71 in Frankfurt, where the company has had its primary listing since December. The listing was moved from Johannesburg to reflect the growing importance of Europe to a company that’s now based in Amsterdam and has a market value of about 18 billion euros ($20 billion).