Bold Steinhoff wins over Darty board

© Oleg Dudko – 123RF.com

Conforama’s all-cash offer crushed a competing one from Groupe Fnac which had reached an agreement with Darty for a lower, mostly paper swap in November last year.

A successful deal will increase Conforama’s scale and broaden its reach into white goods, such as fridges and stoves.

Darty’s board has said it will recommend the Steinhoff and Conforama offer to its shareholders, as it is higher, and provides greater certainty to its shareholders since it is all cash.

Alan Parker, Darty’s non-executive chairman, said the cash offer by Conforama represented a premium to the Fnac offer. It was also "a 54% premium to the price before any potential bidders emerged, and provides greater certainty for shareholders. As a result, the board currently intends to recommend the offer to Darty shareholders".

Darty directors would no longer recommend the Fnac offer, the company said.

Some Darty shareholders have already committed themselves through letters of intent to the offer from Conforama. Schroder Investment Management had agreed to sell its 14% stake in Darty, Steinhoff said. The momentum is in Steinhoff’s favour, but shareholders still have to approve the bid and there is an outside chance Fnac may improve its offer. On Monday, the group said it had noted the Conforama announcement and that "Fnac is currently considering its position and urges Darty’s shareholders to take no action".

On Friday, Steinhoff announced it had reached an agreement with Darty’s board, and said it would no longer consider paying £1.4bn for the Home Retail Group. The deal had the potential to ignite a bidding war as Sainsbury’s had made a £1.3bn approach to Home Retail. Steinhoff gave no details as to why it had backed away from the Home Retail transaction.

Graham Renwick, Exane BNP Paribas retail analyst, said it was possible that Steinhoff had seen something it did not like while it was performing due diligence into the business.

"It was always a little opaque as to why (it went after) Home Retail — it is likely the synergies weren’t there. The general view in the market was that it (the deal) had high execution risk, looked like a bit too much work to do," Renwick said.

"Our view was that Steinhoff was forced to (do) due diligence after the deal deadline was extended by a month with their offer and they have had a chance to think more about it and that it’s not the right deal for them," he said.

Abandoning the pursuit of Home Retail had placed Steinhoff in a strong position to conclude the Conforama deal successfully, he said.

"Fnac could potentially make a higher bid, but Steinhoff clearly have much deeper pockets. If Steinhoff are serious about buying Darty, then Steinhoff are going to win. I am not sure what Fnac will be able to come back with, especially after Steinhoff walked away from Home Retail Group," Renwick said.