Dobbies shares challenge 'will stunt growth'

Published on Saturday 10 May 2008 14:25

SIR Tom Hunter's attempt to scupper a £150m share issue by Dobbies Garden Centres would "seriously curtail" the firm's expansion plans, according to its chief executive.

James Barnes says that, without access to new equity, the firm will have to halt plans to open new stores and finance possible acquisition opportunities.

Dobbies announced last month that it was launching an open offer underwritten by 65% shareholder Tesco.

But Hunter has built a 29.2% minority holding through his West Coast Capital investment vehicle and wants the offer called off because he believes it is not in the interests of shareholders. The Ayrshire-based billionaire has instructed law firm McGrigors to represent him in the Court of Session in Edinburgh tomorrow.

Dobbies is offering five new shares for every six held at a price of 12 a share and if Hunter does not take up his allocation he will see his holding in Dobbies reduced to less than 15%. Taking up his shares would cost him 44m.

Barnes said he was taking a "pragmatic view" on Hunter's action but warned that it could damage the company. "We could carry on as we are, but if we were unable to raise equity it would seriously curtail our expansion ambitions," said Barnes.

He refused to elaborate on his reaction to Hunter's move beyond saying he was "disappointed".

Some observers say that curtailing Dobbies is precisely what Hunter wants, as he fears that a Tesco-controlled Dobbies would endanger his own Wyevale and Blooms of Bressingham chains.

Barnes added: "We have ambitious growth plans and, if anything, they have got more ambitious."

But Dobbies has a high level of debt on its balance sheet which would only rise to less sustainable levels if it was to seek further borrowing to service its plans.

"This takes no account of any acquisitions we may want to take advantage of," said Barnes. "For us it is a no-brainer."

He said the relationship with West Coast Capital was cordial, though he had not dealt directly with Hunter. "We have no problem with them being a shareholder, but we want this resolved as quickly as possible."

Hunter and WCC declined to comment.