Dobbies urges investors to back bid

Dobbies Garden Centres today urged shareholders to back a “very generous” £155.6m (€230m) takeover offer from supermarket giant Tesco.

The letter to investors follows yesterday’s announcement that entrepreneur Tom Hunter’s investment vehicle West Coast Capital did not intend to make a counter bid for Dobbies, which has 21 stores in the UK.

The Dobbies board warned shareholders of the implications of Tesco failing to reach the 50% acceptances mark, particularly on future business performance.

Tesco currently has the support of 32.6% of shareholders, but would be prevented from making another offer for Dobbies for at least 12 months if it is not successful by the new deadline for acceptances of August 19.

That could leave Dobbies with two major shareholders – the other being West Coast – and cause uncertainty for the company, particularly in attracting high calibre staff, Dobbies said.

Investors had anticipated a rival bid from the Scottish tycoon after he amassed a 26% stake in Dobbies, paying up to 23% more than the £15 (€22) a share recommended offer tabled by Tesco in June.

Following his decision not to contest the Tesco offer, Tom told the Financial Times that he thought the Dobbies board had “rolled over” far too quickly in backing the supermarket group’s bid.

He said there should have been a more competitive bidding process.

However, Dobbies pointed out that the offer represented a premium of 23.2% to the closing price of its shares on May 29, the day before Dobbies announced that it had received a takeover approach.

Chairman Alex Hammond-Chambers said: “We retain the view that the offer from Tesco Holdings is an excellent one and that it is in the best interests of all shareholders to accept it.

“I believe it is also in the interests of the customers of Dobbies whose support has been important in the success of the company.”

Dobbies pointed out that the offer did not require West Coast’s acceptance in order to succeed. However, with 26% of the chain, Sir Tom is expected to remain a thorn in the side of Tesco.

Tesco wants to expand the business, especially in the south of England, to capitalise on the current boom in gardening and related demand for “green” products, such as composting kits and water butts.

It has also pledged to maintain the Dobbies brand, which dates back to 1865.

Tom already owns the larger rival garden centre chain Wyevale, as well the Blooms of Bressingham brand.