One of Home Retail Group's top shareholders has publicly backed Sainsbury's £1.3bn cash and shares offer for the Argos-owner, despite previously calling for a bid of at least 200p per share.
Old Mutual, which owns a 3.6 per cent stake in Home Retail, making it the retailer's third largest shareholder, said it regards the latest offer by Sainsbury's worth 161.3p a share as "fair".
Under the terms of the deal announced yesterday, Home Retail Group investors will received 0.321 Sainsbury's shares and 55p in cash per share. They will also receive around 25p per share and a further 2.8p instead of the dividend due to be paid for the year ending 27 February.
The offer represents a premium of 63 per cent of the closing price of Argos' parent company on 4 January.
The fund manager admitted that although the terms were below the 200 pence per share level it had previously urged for, since that time Home Retail had agreed to sell off Homebase to Wesfarmers, published their Christmas trading update and also provided more detail on the opportunities for Home Retail within Sainsbury's.
"Following discussions with representatives of both parties, we have concluded that the terms of the agreed offer are fair, reflective of the future potential of the Argos business and the risk still associated with the transformation plan," Old Mutual said in a statement.
Sainsbury's shares have fallen by 1.26 per cent so far today while Home Retail has also edged down 0.26 per cent.
Separately, Old Mutual has thrown its weight behind another retailer today after upping its stake in Boohoo to over 10 per cent. Shares in the fashion brand have risen by nearly three per cent.