Steinhoff leads Darty auction with $1.2bn offer

London - The battle for French electronics retailer Darty has reached the brisk pace of a cattle auction, with Steinhoff International Holdings [JSE:SHF] raising its offer three times in less than 24 hours in a contest with Groupe Fnac SA.

Steinhoff, which is trading blows with France’s Fnac, upped its terms to 160 pence a share in cash, valuing Darty at about £860m. That tops a 153-pence cash offer minutes earlier from Fnac, which included a partial share alternative.

The suitors are slugging it out for control of a business that leads the French market for items such as refrigerators and televisions, but is little known outside its home. The rapid-fire nature of the contest is unusual in the procedural world of takeovers and shows how both companies recognize the need to get bigger in a market under pressure from online retailers like Inc.

“For Fnac, it’s quite vital that they buy Darty because it offers the diversification that they are looking for,’’ said Michael Treherne, a portfolio manager at Johannesburg-based asset management company Vestact. “It’s more vital for their future to buy Darty than it is for Conforama, and that maybe will lead to Fnac overpaying and Steinhoff walking away.’’

Vestact has about R2.7bn of assets under management, including Steinhoff shares.

More to lose

For Steinhoff, acquiring Darty’s 400 outlets would continue a takeover spree that included the 2011 purchase of French furniture chain Conforama. Fnac, which sells gadgets, books and music, may need the deal more as it has fewer alternatives for consolidation.

“Probably, Fnac has slightly more to lose than Steinhoff,” said Charles Allen, an analyst at Bloomberg Intelligence. “Steinhoff has a lot of arrows in its quiver as it’s not only in France. So if it were not to achieve this deal there are other things that it could do in overall consolidation. Whereas if Steinhoff buys Darty, Fnac will look even more like the number 2 in France.”

Fnac said shareholders owning 27.7% of Darty have agreed to accept its new offer. Steinhoff said investment managers have sold it about 19.5% of Darty’s shares.

Shares surge

The auction began last year when Fnac made a proposal that Darty rejected as being too low. It came back with a bid of 101 pence a share, and got Darty’s board to agree at 116 pence. Steinhoff crashed the party in March with an offer at 125 pence a share. Since then, the two sides have counter-punched in pursuit of their prize.

Darty shares rose 24% to 163 pence at 15:30, exceeding the value of Steinhoff’s latest offer as investors anticipated that the auction may not be over yet. Steinhoff fell 1% to €5.39 in Frankfurt. Fnac fell 1.8% to €56.71 in Paris.

Buying Darty, which sells appliances and electronics, would triple Fnac’s number of stores to about 600. By combining, the retailers would get cost savings and additional sales of at least €130m annually, Fnac said on Thursday. Previously, Fnac estimated €85m in cost savings alone, without a forecast for additional sales.

Increased synergies

The increased synergies forecast by Fnac indicate that Steinhoff, too, may be able to book higher-than-expected cost savings from a deal, said Graham Renwick, an analyst at Exane BNP Paribas. Beyond a price of 160 pence, “returns start to diminish,” he wrote in a report.

Fnac was spun off in 2013 from the French luxury-goods company Kering SA. The family holding company of Kering CEO Francois-Henri Pinault is the retailer’s biggest shareholder, with a 39% stake.

French media and telecommunications company Vivendi SA said this month it’s buying 15% of Fnac in an alliance to cooperate in distribution, live events and digital services.


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