Home Retail a 'sell' after Sainsbury's takeover offer, says Canaccord

2nd Feb 2016 09:48

(ShareCast News) - Home Retail had its 'sell' rating reiterated by Canaccord Genuity on Tuesday after the company agreed on the terms of a takeover bid from J Sainsbury.Sainsbury's has offered £1.3bn for the owner of Argos, equivalent to 161.3p a share.Home Retail shareholders will receive 55p in cash and 0.321 Sainsbury's shares for each of their Home shares.Shareholders will also receive a payout of 25p per share to reflect the £200m capital return from the sale of Homebase and 2.8p in lieu of a final dividend in respect of the financial year ending 27 February."With the total all-in value of the offer some 20% below the 200p some shareholders were cited as looking for from the bidder, a level at which the shares were indeed trading a year ago, this therefore looks like a case of 'possible' capitulation in our view by Home Retail and its shareholders, especially as the Home Retail board 'continues to believe in the prospects for the standalone company'," said Numis analyst David Jeary."Given our fundamental valuation of 100p for Home Retail, this possible offer looks an attractive opportunity for Home's shareholders to cash in their chips. Relative to the 98.7p share price on 4 January, they will receive 82.8p in cash and an option via Sainsbury paper (78.5p) to maintain an interest in Home's future - albeit with exposure to the UK grocery sector and its current challenges."Numis kept its price target unchanged at 134p.Shares rose 0.20% to 153.20p at 1011 GMT.