Shares in Home Retail rally over Homebase bid rumours

 
Kasmira Jefford
Follow Kasmira
Preview Day At The 2015 Chelsea Flower Show
Homebase's garden at the Chelsea Flower show this year (Source: Getty)

Shares in Home Retail Group rose more than three per cent yesterday on the back of reports that the former boss of Garden Centre Group is considering a bid for Homebase.

Nicholas Marshall, who stepped down as chief executive of the rival garden retail chain – now called Wyevale Garden Centres – in 2012, told the Financial Times that he had been eyeing Homebase for the past two years, but had yet to make an approach.

He has been in talks with several private equity firms over making an offer, which could value the chain at several hundred million pounds, the paper said. Home Retail said it did not comment on speculation.

It has been overhauling 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. Under former Tesco executive, Echo Lu, the company has been revamping its stores, introducing more Habitat concessions and launching new homeware brands to appeal to more upmarket shoppers.

Shares closed up 3.4 per cent at 106.40p.

In a reversal of roles, it has been Home Retail’s larger Argos chain that has been causing it trouble of late, after the company issued a profit in October ahead of the crucial Christmas season.

The FTSE 250 retailer said investment in its new same day delivery service, weak sales of electrical goods, and uncertainty around trading going into Christmas meant full-year profits are likely to be below the bottom of forecast range of £115m to £140m.

Marshall is an industry veteran after founding County Gardens in 1985 with £2 and expanding it into the UK's second largest garden centre group. It was acquired 15 years later by Wyevale for £111m following a hostile takeover. Over the next three years, trading conditions deteriorated and in 2006, Wyevale was taken private by a consortium, including HBOS.

Marshall returned to run the chain in 2008 and revive its fortunes, changing its name to Garden Centre Group. He left in 2012 shortly after it was bought by Guy Hands' Terra Firma.

Related articles