Picture: THINKSTOCK
Picture: THINKSTOCK

LONDON — Home Retail Group shares rose in early trading on Monday, after a takeover of the company turned into a £1.4bn contest.

Steinhoff International Holdings, the owner of Conforama furniture stores in France and Bensons Beds in the UK, said late on Friday it planned to make a 175p-a-share cash offerfor the British retailer, topping a bid from supermarket chain J Sainsbury.

Home Retail gained as much as 12% to 172.5p, the highest since July 3. Steinhoff’s bid came days before Tuesday’s deadline for Sainsbury to make a formal proposal, having previously reached agreement on the terms of a cash-and-share offer worth about 167p a share. The grocer now needs to raise its bid if it wants to win the contest.

"Steinhoff certainly looks like a serious bidder," Bruno Monteyne, an analyst at Sanford C Bernstein, said in a note. "Sainsbury’s might be keen to avoid a bidding war, but we would expect them to match the Steinhoff bid, and hope that the fact they are further down the line on due diligence will mean the board will accept their offer."

Sainsbury has yet to formally respond to Steinhoff’s proposal. Analysts at Exane BNP Paribas said they expect the grocer to come back with a higher offer.The shares fell 0.9% to 258.7p in early London trading.

The bidders are vying for control of a business that operates more than 800 Argos shops, selling everything from jewellery to televisions.Home Retail would further increase Steinhoff’s presence in Europe, where it gets more than half its R135bn worth of sales from operations in the UK, France and Germany.

Steinhoffgained as much as 4.6% to €4.71 in Frankfurt, where the company has had its primary listing since December. The listing was moved from Johannesburg to reflect the growing importance of Europe to a company that’s now based in Amsterdam and has a market value of about €18bn.

The furniture retailer saidits offer comprises 147.2p a share in cash, plus a 2.8p dividend and 25p to reflect Home Retail’s sale of the Homebase UK home-improvement chain to Australia’s Wesfarmers.

Bloomberg