Tesco UK calls for Garden centre bid support

Supermarket giant Tesco tightened its grip on Dobbies Garden Centres in the UK today by revealing it now owned just over 28% of its takeover target.

Tesco, which first launched a recommended offer for the firm in June, also left its offer price for the chain unchanged as it called for investors to back its approach for the firm.

The £15 a share offer is currently the only bid on the table, although there has been much speculation over a prospective rival bid from Tom Hunter, the owner of the Wyevale and Blooms of Bressingham garden centre chains.

Tesco said it had exercised an option to buy 16% of Dobbies, after the proposed deal was given the green light by the Office for Fair Trading last week.

Investors have until lunchtime on Wednesday to back the bid, following a deadline extension in July after Tesco received backing from 32.2% of shareholders. It needs acceptances from 50% of investors for the deal to succeed.

Tom has built up a 25.6% stake in the company and is rumoured to have been in talks with Icelandic investment group Baugur about joining forces to launch a counter-offer to Tesco’s 1500p a share bid.

Whilst shareholders may be holding out for a rival approach, they may also be reluctant to back the Tesco deal with Dobbies’ shares currently trading above the level offered by the UK’s largest supermarket chain.

Tesco is keen to get its hands on the garden centre group to capitalise on the current boom in gardening and related “green” products, including composting kits and water butts.

Tesco wants to extend the firm’s range of environmentally friendly products to offer wind turbines, home insulation and services such as carbon footprint calculators.

It would also seek to expand the chain, particularly in the south of England, to offer “greater choice and keener pricing”.

If the deal is successful, Tesco has pledged to maintain the Dobbies brand, which dates back to 1865, and would retain its head office in Midlothian.

However, Tesco would be highly restricted in its plans for the chain if its offer is accepted by 50% of shareholders as it will not have constitutional control of the company. Additionally, if Tom does not launch a rival bid he could prove to be an awkward minority stakeholder should Tesco fail to persuade him to strike a deal.

Dobbies is the UK’s third largest garden centre chain, with 21 stores based mainly in Scotland and the north of England.