It’s not surprising that Sainsbury’s headline-grabbing £1.3bn bid for Argo owner Home Retail Group hogs the limelight in today’s papers.
The Independent said the Argos revolution had begun at Sainsbury’s with CEO Mike Coupe planning to win over shoppers in a “bricks-and-clicks” race with rivals. The supermarket wants to have Argos concessions in nearly all of its large Sainsbury’s stores.
The Telegraph’s retail correspondent writes the offer to takeover Argos takeover is as “cheap as a Fisher Price toy set”. The article drills into the financial “jiggery-pokery” to explain how the supermarket chain is using Home Retail’s existing cash and loan book to finance the deal. It quotes CFO John Rogers from yesterday’s media call: “Essentially, we’re buying Argos for around £250m.”
A business commentary in The Times covers the same ground, with Alistair Osborne noting archly that Coupe had found “£850m spondulicks” hiding in the Argos catalogue. “Mr Coupe and John Rogers, his numbers man, have hit upon a brilliant wheeze, if that’s the right word, even if it does seem vaguely reminiscent of the type that caused the last financial crisis: why not refinance the whole transaction with a bank you already happen to own, lure some new depositors to pay for it and bang on about ingeniously ‘lowering group leverage’? Sounds too good to be true? Possibly, but it might also persuade the doubters about the joys of Argos.”
The Financial Times also examines the financial engineering which it writes is “not immediately associated with a grocer”. Its Lex column points out that despite all this the market shrugged at the deal even if it did look good on paper. “The market reaction? None whatsoever. Deals can be harder to sell than eggs and milk.”
News that Ocado had scored its second year of profits, with a 65% rise to £11.9m, was somewhat overshadowed by the M&A activity. The Telegraph and The Times highlighted that despite the good growth a deal to provide its services to an international retailer remained elusive. CEO Tim Steiner wisely demurred from setting another self-imposed deadline for signing a tie-up.
The FT’s Lombard column said the Sainsbury’s deal to buy Home Retail shone a “harsh light” on Tim Steiner’s efforts at Ocado. “Shareholders called the deal defensive. To rivals, it looks downright offensive. This is not just about Sainsbury moving into non-food retailing but about shopping on the move and multichannel retailing in a way that Ocado, with its customer fulfilment centres, can only dream of. Ocado claims to be more than a van hire business… But unless Mr Steiner delivers on his promised ‘multiple deals in multiple territories’, and soon, Ocado looks like a trucking business stuck in traffic.”
The Guardian lifts the gloom a little with its focus on the £8m in bonuses Ocado’s management team is in line to receive for its profits growth. About 100 managers, including Steiner and FD Duncan Tatton-Brown, will share the £7.8m pay out, the paper said.
The Financial Times takes a look at a battle raging between France and the US as a New Jersey financier and short-seller attacks supermarket group Casino. Carson Block of Muddy Waters Capital claims the French retailer is one of the most overvalued and misunderstood companies he has ever come across. The paper asks if other European companies could now be targets.