Dobbies defends plea for cash as Hunter takes firm to court

Published on Friday 9 May 2008 14:08

THE chief executive of Lothians-based Dobbies Garden Centres today insisted the company is right to ask shareholders for extra funds, after entrepreneur Sir Tom Hunter launched a legal action against the plan.

Dobbies plans to hold a rights issue in order to raise an additional 150 million to help it expand.

But it was revealed today that Sir Tom's investment vehicle West Coast Capital (WCC) is to fight the proposal in court as he continues his battle for control with Dobbies' majority shareholder Tesco.

Under the proposal, Sir Tom would have to invest more than 30m in shares to maintain his current 29.2 per cent stake in the firm.

The rights issue is almost certain to be approved when it is voted on at Dobbies' annual general meeting on May 21 as only 50 per cent of shareholders need to approve it and Tesco – which is supportive – has 65 per cent of the shares.

It is understood that the case will be heard in court within the next week.

Dobbies chief executive James Barnes said today: "We would just like to see this issue resolved as soon as possible – we will be pressing for that. It is a busy time of the year for us, as a garden centre chain, especially with the weather this week, and we would rather concentrate on our business.

"The rights issue is important for us because it provides finance for our future growth and expansion. We are looking to add three stores this year, four next year, five the year after and so on. That is where the bulk of the monies will go."

Tesco only needs 75 per cent of shares in order to be in the position to delist Dobbies and take it private – and analysts see the rights issue as being a means of it upping its stake.

But Mr Barnes insisted there has been "no discussion whatsoever" about the prospects of that at board level.

And he insisted that WCC remains an important and valued shareholder. He said: "They are our second biggest shareholder and they are a wealthy shareholder that have made positive statements in the past about our growth potential.

"There are obviously technical issues that have to be sorted out and the sooner that can be done the better."

The company said that it intends to present a "robust defence" of its strategy at its court hearing.

A spokesman for WCC said: "It is a matter for the courts. West Coast Capital has no further comment to make."