Dobbies battle rages amid speculation Hunter will mount counter bid

Published on Sunday 24 June 2007 00:59

THE battle for control of Dobbies Garden Centres is expected to intensify this week amid speculation that Sir Tom Hunter is considering a counter bid for the group.

The Ayrshire entrepreneur has upped his holding in the group to 25.6%, effectively blocking Tesco's original 156m bid. Tesco has retaliated, dropping the acceptance level it requires for its offer from 75% to 50%.

But last night Hunter's West Coast Capital said it was still considering all its options, including a full-scale bid for Dobbies.

It was thought that a rival bid would involve Hunter's long-term backers, Bank of Scotland and Icelandic group Baugur. But it has emerged that Hunter would not need to form partnerships as he has capital reserves to buy the group outright.

Hunter, it seems, is determined to prevent Tesco from entering a garden centre sector which he appears to view as his own.

Last year he bought English chain Wyevale Garden Centres for 310.9m and he has recently acquired Blooms of Bressingham.

In little more than a week he has raised his stake in Dobbies from 10.59% to 25.57%. Analysts say Tesco would have to raise its bid, despite dropping the acceptance level, as Hunter had been stake-building at prices of up to 1,845p a share.

Dobbies employs more than 1,500 staff across the UK, with the majority of its 21 stores in Scotland and northern England. James Barnes, the Dobbies chief executive whose near-7% stake is valued at about 10m by the current Tesco bid, has highlighted potential to add another 75 outlets in the next 10 years.

Tesco said that its offer will be open until July 18.

Tesco is now prepared to accept management control, rather than the power to push through major structural resolutions. With a majority ownership it will be able to make day-to-day decisions for the company, but the altered position would remove its ability to strip out the costs of listing the company.

Dobbies recorded a pre-tax profit of 2.5m in the six months to April 30, as sales climbed more than a third to 40m.

Its shares finished the week up 15.5p, or 0.92%, at 1,705p.