Shares in the Argos owner Home Retail Group have dived nearly 10%, making it the biggest faller in the FTSE 250, after a report that takeover talks with Sainsbury’s had stalled.
Days before the 2 February deadline for Sainsbury’s to decide on whether to make a bid, the two sides are understood to have ceased talks as they struggle to agree a price.
Sainsbury’s is unwilling to pay more than 150p a share for Home Retail, valuing the company at £1.22bn, according to a report in the Financial Times, while Home Retail is holding out for 170p a share.
This month the Sainsbury’s chief executive, Mike Coupe, and finance director, John Rogers, made clear that they would walk away from a deal if they could not get what they considered a reasonable price.
Home Retail’s negotiating position has been helped by a deal to sell the Homebase DIY chain, which Sainsbury’s did not want, to the Australian firm Wesfarmers. But it was also weakened by a post-Christmas profit downgrade after an unexpected slide in sales at Argos.
Home Retail’s share price was down nearly 10% just before midday on Friday, at about 129p.
The report comes after it emerged that a major Home Retail shareholder, Toscafund Asset Management, had sold 10m shares in the company at 152p each, reducing its stake to 7.25% from more than 8%.
David Jeary, retail analyst at Cannacord Genuity, released a note on Thursday saying that any bid for Home Retail after its sale of Homebase would be at a premium if it were more than 135p a share.
“As long-term observers of Home Retail, we remain less convinced of the strategic logic and rationale of such a deal. However, just as beauty is in the eye of the beholder, value is in the eye of the bidder,” he wrote.
Sainsbury’s shares rose 2.7% on Friday on reports that talks had stalled.
