Sunday Retail News Roundup
South Africa’s deal-hungry retail giants are busy bagging British companies. Argos could be their latest trophy if Sainsbury’s loses the bidding war. The Friday before last, Steinhoff swooped after the close of trading with news of a 175p-a-share approach for the catalogue retailer’s parent company, valuing it at £1.4bn. Its putative bid trumped an existing cash-and-stock offer from J Sainsbury priced at about 165p-a-share, or £1.3bn. The intervention prompted Home Retail Group, which owns Argos and Homebase, to ask the Takeover Panel for an extension to the deadline for Sainsbury’s formal offer. Britain’s second-biggest supermarket and its German-South African rival have until March 18 to manoeuvre for control of a company many in the City had thought could go the way of Comet and MFI. Steinhoff is not the only big game hunter from South Africa tracking prey on Britain’s high streets. Christo Wiese, 74, has taken majority stakes in Iceland, New Look and Virgin Active through his private equity firm, Brait. The billionaire is also trying to develop a discount fashion chain called Pep & Co with former Asda boss Andy Bond. Truworths, a Cape Town-based clothing retailer, has bought UK shoe specialist Office, while Foschini Group, also of Cape Town, has snapped up women’s outfitter Phase Eight.
Mail on Sunday.
Supermarket giant Sainsbury’s is mulling a higher offer for Argos in the wake of an attempted swoop by a South African conglomerate. In an announcement released just days before the deadline for a final bid, retail group Steinhoff said it could offer £1.4billion, or 175p a share, for Argos-owner Home Retail. Both firms are now engaged in due diligence after the deadline was extended from February 23 to March 18 in line with the Steinhoff timetable. The board of Sainsbury’s and its advisers are understood to be using the extra time to review the £120million annual cost savings that shareholders have been told it could make from a tie-up. Sainsbury’s has bid £1.3billion, about 165p per share, and informed shareholders that the acquisition would accelerate its strategy by up to three years. But it has also made clear that it will not overpay.
Sainsbury's chief Mike Coupe has staked a lot on his audacious bid to buy Argos-owner Home Retail Group. Which is why he should not be afraid to walk away if the betting gets too rich. Having managed to convince leading shareholders that taking over Argos was a great strategic plan, he now faces a bidding battle for the group after South African retail giant Steinhoff declared it was interested and would pay much more than Sainsbury’s. And in cash to boot, rather than a mix of cash and shares. Sainsbury’s has so far opted to press ahead with it due diligence on Argos to assess whether it could justify paying more and so outbid the South Africans. But with scepticism among his own shareholders rife, the entrance of Steinhoff could be the chance to step away, save face and save himself from overspending. There is merit in the Argos plan. Unconventional it may be but the retail sector is going through unconventional times thanks to a permanent shift to budgeting among many shoppers and, of course, the delivery and click and collect revolution. Bringing Argos into Sainsbury’s stores makes a lot of sense and using, or combining, Argos click and collect and delivery systems offers obvious opportunities. But it is not risk-free and that is why Sainsbury’s must now err on the side of caution.
The chief executive of BT warned this weekend that quitting the EU could drag business back to a ‘bygone era’ of import taxes and regulations. Gavin Patterson, who last week signed a public letter calling for Britain to stay in the EU, said the 28-member group gave UK business added protection in a ‘harsh and unforgiving world’. ‘Critics complain of EU bureaucracy and rules. They miss the big picture, the opening of EU markets to whichever companies can offer the best prices, services and products'. Patterson and his chairman Sir Michael Rake were among the bosses of 36 FTSE 100 companies who came out in favour of staying in the EU
Sports Direct, the beleaguered retailer controlled by billionaire Newcastle United owner Mike Ashley, faces almost certain relegation from the FTSE 100 Share Index on Wednesday when the quarterly review is announced. The chain’s declining performance coupled with a series of public relations disasters, including clashes with MPs, have seen the firm’s value crash by half in just five months to £2.3billion. The humiliating turn of events follows two and a half years in the FTSE 100 with an increasing focus on the company’s business practices, including criticisms of its working conditions and its use of zero-hour contracts, and the behaviour of its executives. The retailer is likely to join into the FTSE 250. Whilst a revival by supermarket Morrisons has put it within reach of a bounceback into the FTSE 100 after it fell out in December.
The parent company of Boost Juice Bars UK, TD4 Brands, has said sales have nearly tripled over the past two years to more than £13million. Richard and Dawn O’Sullivan set up the UK franchise of the international business in 2007, shortly after they sold bakery chain Millie’s Cookies, and first received funding from growth capital provider the Business Growth Fund in 2013. Since then, the Manchester-based firm has increased the number of Boost bars from 10 to 32 and opened seven new sites in the past year, including in Cambridge, Reading, Southampton and Sheffield. TD4 introduced milkshake bar The Shake Lab to Manchester’s Trafford Centre mall in December, and seven other locations are being targeted for a roll-out this year. TD4 now has a team of 400 and up to eight more Boost bars are planned for the UK this year. BGF has increased its investment in TD4 to £4.9million to support the expansion. Boost has a franchise network of 400 stores worldwide.
For the first time, senior Roman Catholic, Church of England, Church in Wales, Methodist, United Reform Church and Salvation Army figures issue a joint statement opposing the government’s plan to relax Sunday trading laws. Plans to allow large shops to open for longer on Sundays will damage family life and do nothing to boost the economy, an unprecedented alliance of Christian leaders warns today. The warning comes after ministers announced they would give local councils in England and Wales the power to allow large retailers in their area to open for longer, in measures contained in the Enterprise Bill, which is passing through Parliament. Under current rules, small shops can open whenever they want, but on Sundays, larger stores are restricted to a maximum of six hours in the period between 10am and 6pm. Sajid Javid, the Business Secretary, said relaxing the restrictions would enable local authorities to “help struggling High Streets”. He has faced opposition from traditionalist Tory MPs and faith leaders have spoken out individually.
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