Hunter challenges Tesco over Dobbies

Dobbies Garden Centres, the AIM-listed group controlled by Tesco, has said that second largest shareholder West Coast Capital (Lios) Ltd has started legal proceedings against the company.

West Coast, the vehicle of Scottish entrepreneur Tom Hunter, owns rival garden centres Wyevale and Blooms of Bressingham. It tried to thwart Tesco’s takeover of Dobbies last year by taking a 29.9% stake at a level above Tesco’s 1500p offer price.

That valued the group at £155.6m. Now Dobbies wants to raise £150m via an open offer at 1200p a share. Existing shareholders can subscribe for six shares for every five they already hold.

West Coast fears this will allow Tesco to increase its holding proportionately in the group, by buying up the rights of those shareholders who do not take up the offer. Tesco is underwriting the offer.

Consequently West Coast is now “seeking an interim order to block the Company’s proposed open offer to shareholders”.

Dobbies says the offer “will enable the Company to progress its stated expansion plans and the Board believes that it provides access to funding on attractive terms in current market conditions which will be earnings enhancing”.

It added that it “intends to present a robust defence of its strategy at the court hearing” but will not comment further at this stage as it “is bound by legal process and confidentiality”.

Dobbies AGM is on May 21, at which the offer will be voted on. Brewin Dolphin and Shore Capital are brokers to the offer.