Yesterday’s
surprise announcement of an initial rebuff by HRG not only places the
Argos-Homebase combination firmly in the takeover frame, but also sets a
minimum starting price of £1bn.
The
advantages for Sainsbury’s in terms of adding to their non-food offering,
making more use of big-space via a transfer of Argos Click & Collect, and
re-acquiring a DIY operation they sold some years back, combined with
successful initial trials of Argos shop-in-shop make this a must-have
acquisition, but not at any price.
Incidentally,
gaining access to Argos Click & Collect expertise hopefully does not
rank high in terms of plus-points, given that this ‘mail-order’ company
transitioned into ‘hard-copy’ click & collect as an extension of their
original business rather than a high-tech entry into online…
It
also goes without saying that Argos vs. Amazon is a no-contest battle, on any parameter…
In
terms of upping-the-ante, with a market capitalisation of £5bn, a share price
showing a 57% drop since 2008, and continuing pressure from the discounters,
Sainsbury’s is not in a position to raise their bid significantly in the month
that remains in which to make an improved offer.
However,
having put HRG in the spotlight, other mults now have until 2nd February to assess the
relative appeal of acquisition in terms of similar advantages to their
businesses.
In
practice, Tesco and Morrisons are currently distracted by more pressing issues,
but Asda’s Walmart (Mkt Cap $196bn) would have little problem in covering
‘whatever it takes’ to add scale to their UK repertoire…
On
balance, the next move depends on the extent to which Sainsbury’s faith in the
future of Local convenience causes them to consider converting ‘as many as it
takes’ of Argos 800 High Street outlets – moving more Argos ranges into larger
Sainsbury’s outlets – into additional Local branches, and persuading their
largest shareholder - Qatari - to make up the difference…
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