Freddie George Comments: French suitor eyes bid for DIY chain Homebase

December 8, 2015, City A.M. (Online)

Takeover interest in Home Retail Group’s Homebase is heating up amid reports that a French rival is eyeing a bid for the DIY chain.

Leroy Merlin, the French home-improvement and gardening retailer with stores in 13 countries, is said to have examined a bid for the group.

It is unclear whether the Family-owned group is still interested. However, a source cited by The Sunday Times said it has taken “repeated looks” in recent years.

It comes amid reports last week that the former boss of Garden Centre Group, Nicholas Marshall, is also looking at Homebase while private equity firms are said to be circling the wider group.

A spokesperson for Home Retail Group last night said it is "focused on peak trading" and would not comment on speculation.

Home Retail has been carrying out a dramatic overhaul of its Homebase portfolio after announcing plans last year to close a quarter of its 323 branches, blaming excess retail space and the rise of a generation that had fallen out of love with DIY.

Homebase’s revenue fell by 2.2 per cent to £816.4m in the first half of the year from £834.5m last time as a result of the store closures. However trading has shown signs of improvement, with like-for-like sales up 7.8 per cent. 

According to Investec analysts, Home Retail could be worth up to £1.45bn, assuming an equity value value of £230m for Homebase and £360m for Argos.

“A splitting up of Home Retail we think could be feasible despite the group using its scale to commonly source wwwuct and dual-stocking of lines in Argos & Homebase,” Investec’s Kate Calvert said. 

Freddie George at Cantor Fitzgerald said he believes Home Retail is "significantly undervalued" and has a break-up value of  around 260p per share compared to its current share price of 106p. 

Shares have risen by 2.5 per cent over the last week following amid bid speculation.