Hunter bids for Dobbies

UK supermarket chain Tesco could face competition from retail entrepreneur Sir Tom Hunter over its recommended £228m (€338.3m) bid (including debt) for Scottish garden centre chain Dobbies.

Tesco announced its surprise takeover of AIM-listed Dobbies Garden Centres on June 8 following market speculation that Hunter’s West Coast Capital acquisition vehicle and private equity firm Apax were tabling bids for the target.

Since then, Hunter had increased his stake in Dobbies to 21.4% by June 20. On June 14, West Coast Capital doubled its holding in the target to 20.6%, buying shares at £17.50 each. On June 20, it bought a further 81,339 shares at £18.00 each.

Hunter has not commented on whether West Coast Capital might make a counter-bid. Analysts claim he might want to block the Tesco deal to lessen competition for his own garden centre interests – he owns stakes in Wyevale Garden Centres and Blooms of Bressingham – or force the supermarket to overpay for the target and then sell his stake at a profit.

Furthermore, Arnhold and S Bleichroeder Advisers, a New York-based hedge fund, is understood to have bought derivatives that give it a theoretical 1.58% stake in Dobbies.

For its part, Tesco has played down talk of a challenge. Talking to reporters on June 19, while issuing a trading statement, group finance director Andrew Higginson reiterated that Tesco was “the only bid in the market at the moment” and that it would post a circular to shareholders within days.

Tim Burke