Private equity groups consider bid for Argos owner

Home Retail Group shares rose the most in more than two years after a report that private-equity companies are considering a bid for the UK retailer. The stock jumped as much as 7.4 per cent to 111 pence, the steepest gain since September 2013.

Prior to today's jump, the shares had halved this year, valuing the owner of Argos stores and the Homebase home-improvement chain at £841 million pounds. The Sunday Times reported that several retail industry figures have been asked to advise on potential approaches for Home Retail, which it said could be worth £1 billion.

The retailer didn’t immediately respond to a message seeking comment. The report of “opportunistic” takeover interest is unsurprising given the company’s low valuation, Alistair Davies, an analyst with Investec, said in an e-mail. “Any potential bidders will likely wait until after the peak trading update,” he said. The UK’s adoption of the Black Friday shopping event has proved problematic for Argos, whose systems buckled under the weight of heightened demand last year.

Concern of a repeat this year led chief executive officer John Walden to say the company would miss full-year earnings estimates before the peak Christmas season had even begun. The company’s struggles have attracted short sellers, who seek to profit from a falling share price.

Short interest in Home Retail is equivalent to 9.8 per cent of its shares outstanding, compared with an average of 1.7 per cent for other companies in the UK’s FTSE 250 Index, according to data provider Markit.

Bloomberg