HOME - Interesting week ahead

Friday, Jan 08 2016 by
3

HOME - Interesting times

Next week is a crucial time for HOME the owners of Argos and Homebase, after the RNS announcement from Sainsbury on Tuesday that their offer in November for Home was rejected by the board of directors.

First up on Wed 13th is the third quarter trading statement from Sainsbury’s followed the next day by Homes Q3 statement.

It seems very clear to me that Sainsbury will be making a second approach, they have until the second of Feb effectively to put up or shut up. The announcement itself would serve no purpose if a second bid was not going to happen. By making the announcement they are effectively probing both Home and their own shareholders for approval.

We know that Sainsbury have been trialling Argos click and collect in some of their stores in 2015, given the bid approach it is clear that these stores have benefited from this venture. The benefits of combining the two companies were given in Tuesdays RNS…..

Create a food and non-food retailer of choice for customers, building on the strong heritages of both businesses whose brands are renowned for trust, quality, value and customer service;

Deliver profitable sales growth by offering customers the right combination of location, range, speed and flexibility, across a wide range of products;

Bring together multi-channel capabilities and delivery networks for fast, flexible and reliable delivery to store or to home across a wide range of food and non-food products;

Optimise the use of their combined retail space. The combined entity would have attractively located stores across the UK, with an enhanced supply and delivery network and a strong presence across food and grocery, clothing, homewares, toys, stationery, electricals, furniture and other general merchandise;

Create a financial services proposition that will provide a wider range of customer-centric services including credit cards, loans, deposits, insurance and ATMs;

Deliver revenue synergy potential through the ability to sell to each other's customers, including the operation of Argos concessions within Sainsbury's stores, and the sale of Sainsbury's products and services through Argos's network;

Provide additional cost synergy potential through property rationalisation, scale benefits and operational efficiencies.


Note that there is no reference to Homebase here so we can expect it to be sold off…

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9 Posts on this Thread show/hide all

jonny71 11th Jan '16 1 of 9

Share price is on the move this morning, (Monday 11th) I'm guessing the city are thinking a further bid is due. I believe Homebase will be sold to another 3rd party and that the pursuit for Argos will continue. I'm not sure what happens to Habitat. This week is very exciting with 3rd qtr trading statements for Sainsbury and Home retail due on Wednesday and Thursday respectively.

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kalkanite 13th Jan '16 2 of 9

A rather neutral trading statement today from Sainsbury's. The following link is the rationale for its HOME bid published today.....

http://www.j-sainsbury.co.uk/investor-centre/home-retail-offer/

Looking at slide 18, it is very easy to see why the combination would make so much sense. Using their PTP figure of £132m for HOME and the annual rental amounts - SBRY £547m - HOME £333m a saving of £200m on rent alone by year 5 should be easily achieved, that's without taking any other synergies into account.

I intend to hold on to a portion of my HOME shares to share in the future growth of Sainsbury's.

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jonny71 31st Jan '16 3 of 9

Hi knowledgeable people, can some one help me out? I hold Home retail shares, with the promise to return 24.6p per share to shareholders when the sale of Homebase to Wesfarmers is complete, at what point in time will the calculation be made on what to return based on the each individuals holding?

I've been trading Home Retail shares over the least few weeks of volatility and with this Tuesday deadline for a bid from Sainsbury's now due I've reduced my holding and will be looking to either sell more depending on what happens. However a big factor in making decisions is the 24.6p return to shareholders.

The Wesfarmers deal has to be approved by shareholders, so I'm guessing the point at which the amount to be returned is calculated will be after this, but how can I find this date?

Thanks

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TheMarinersWife 31st Jan '16 4 of 9

In reply to post #120134

Jonny
Not a follower of this company, or this situation. However, I would expect that the company will announce it when the details are formalised, usually the mechanism for this is RNS.

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jonny71 1st Feb '16 5 of 9

Looks like the deal has been agreed at £1.60, an announcement should be out tomorrow.

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bsharman 1st Feb '16 6 of 9

In reply to post #120134

I don't think shareholders have voted yet. When they do I expect that there will be a schedule i.e. a date where holders are entitled to the 25p pay-out (similar to a x-div date)

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gus 1065 2nd Feb '16 7 of 9

Terms of a potential offer just posted by both companies on RNS.

http://www.investegate.co.uk/home-retail-grp-plc--home-/rns/possible-offer-by-j-sainsbury/201602020703007438N/

161.3p made up of shares, cash, final div make up and distribution from sale of Homebase. Looks at the lower end of some people's expectations but does provisionally carry recommendation of Home Retail (LON:HOME) board. At this level, I think it looks a good deal for Sainsbury's.

Gus.

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jonny71 2nd Feb '16 8 of 9
I've done some maths on the deal please correct me if this is wrong

1000 shares @ £1.61 = £1610

25p returned from Homebase deal and 55p returned from Sainsburys plus 2.8p dividend= 82.8p returned

1000x0.828 = £828

1000 Home shares become 0.321 Sainsburys shares = 321 shares

Sainsburys price today £2.44 x 321 = £783

You now own £828 returned as dividend and £783 in Sainsburys shares = £1611

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Flackwell 3rd Feb '16 9 of 9

whoops - that was an up vote jonny71 (but I missed - it won't let me change)

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