US investor gives Home Retail a boost

HOME Retail Group saw its shares jump yesterday after US private equity firm Madison Dearborn Capital Partners upped its stake.

The Argos and Homebase owner issued a profit warning last month but was buoyed by the move from across the Atlantic.

Tradewinds Global Investors, controlled by Chicago-based Madison, held 4.25 per cent of Home Retail’s voting rights as of the end of March, the retailer said. The stake was only 3.2 per cent in mid-March. The FTSE 250 company has been the subject of takeover speculation and is seen as a potential target for Asda owner Wal-Mart.

Freddie George, an analyst at Seymour Pierce, said: “It takes a leap of faith, in our view, to invest in a company on speculation, when Home Retail’s profits have declined each year over the last four years at a time when Internet channel sales have been very strong.”

Home Retail chief executive officer Terry Duddy lowered the company’s profit outlook on 10 March, warning “difficult and volatile” conditions were damaging sales at Argos. Home Retail now expects to make profits before tax of between £250m and £255m for the year to 26 February, down from its January forecast of £263m and the £293m made on 2010. But the stakebuilding by Madison is seen as a positive move in investors’ eyes. Home Retail shares closed 1.7 per cent higher at 208.1p.