Home Reit Share Discussion Threads

[jonny33] 28/1/2016 19:32

Just found this....not good news



Toscafund said it had sold 10m shares in the Argos owner at 152p apiece, which reduced its holding to 7.25 per cent. Martin Hughes, founder of the hedge fund, has publicly criticised Home Retail management for rejecting a takeover offer in November from J Sainsbury without first consulting shareholders.

Sainsbury has until February 2 to make another offer or walk away. The talk among traders has been that the sides are still far apart on price, with Sainsbury said to be offering only a small improvement to its November offer that was reportedly about 130p a share. That would probably be at least 50p short of a valuation Home Retail’s board would be prepared to recommend, traders said.

Canaccord repeated “sell” advice on Home Retail, saying that any offer above 135p a share would be at a premium to the wider retail sector. “Only a strategically compelling transaction could justify that,” it said.

[jonny33] 28/1/2016 19:29

I believe (and I'm guessing) all institutional trades have to be reported whilst there is a bid pending. There has been hundreds over the last few weeks. After the 2nd Feb reporting like this should stop.

[it_trader] 28/1/2016 19:26

RickyVadar, they are not the forms you should be looking at

[market sniper3] 28/1/2016 19:23

Look to be up above anyway here on this thread.

[market sniper3] 28/1/2016 19:22

Place http in browser instead of hxxp.

[market sniper3] 28/1/2016 19:21

Far right under company announcements. Looks like funds hedging there positions both long and short.

hxxp://www.hl.co.uk/shares/shares-search-results/h/home-retail-group-ordinary-10p?tab=security_news

[rickyvader] 28/1/2016 19:08

iF you go on hl website and they are listed in home and sainsbury . They are forms 8.3 and 8.5. And mention bids and share dealings

[dins1249] 28/1/2016 18:49

RV
Where did you pick that up from?

[rickyvader] 28/1/2016 17:17

Lots of forms gone in from sainsburys at 430pm in connection with home. J

[mrx9000] 28/1/2016 16:03

katie: thanks for the advice.

[katie priceless] 28/1/2016 16:01

mrx9000

You have posted your advice about market sniper , so you can go now.

[market sniper3] 28/1/2016 15:55

Sainsbury’s notes the articles recently published in the Times and the Guardian.

We understand that the QIA is not the source of these articles and has not yet taken a final position on the proposed Home Retail Group transaction. Like any other shareholder the QIA would consider any such proposal in detail before making a final decision on its position.

[jonny33] 28/1/2016 15:48

Just in case either of you two decide to have a fight about who is a bully and who is a troll DON'T for the sake of the rest of the board please PM each other and sort it out 121 and not in public.

[mrx9000] 28/1/2016 14:15

My advice in regard the user market sniper, is just to filter him. I have done a new thread on advfn that lists Keyboard Warriors and Trolls here

[scapital] 28/1/2016 14:01

Almost no chance of them pulling out.The only question is whether their second bid will be high enough.

[imperial3] 28/1/2016 13:32

Hopefully,Sainsbury will not back out now??!!

[solanki2000] 28/1/2016 12:58

I personally think around 190 will go through. If there is offically a re-entry then we may see a bidding war as other supermarkets can't allow this to just happen, will loose their market share and change their own strategy

[market sniper3] 28/1/2016 12:54

200p and no less, the bears are getting desperate.

[jonny33] 28/1/2016 12:15

This looks like the cause of the wobble just now

FT Alphaville today


BE

Anyway, HOME a bit weak this morning.
PM

hxxp://www.theguar...eam-football-story
BE

Some talk around among the short sellers this morning, which as absolutely not been backtested, to be clear.
BE

The idea being that Sainsbury will bid again, but it's likely to be an incremental bump rather than a knockout.
BE

And HOME would struggle to accept an incremental bump.
PM

hmm
Real time stream connected. New messages will appear here the moment they are published.
BE

Note the HOME short interest, though.
BE

PM

8% or so
BE

Yup, still nearly 9% of free float. There's a plenty to be made from spreading bear stories.
BE

Anyway, let me get Haitong
BE

Tony Shiret, who absolutely hates Argosbury.
PM

does he now
BE

Or Argbury. Perhaps that's better.
BE

Clearly the only things that can save Home Retail (HOME) as an independent company now would be pressure on Sainsbury (JS) (SBRY LN, 236p, Neutral, FV 235p) management not to proceed to make an offer, or a derisory low-field price. For Sainsbury CEO Mike Coupe either would represent a significant personal blow and we would expect management to be even more determined to continue despite the almost universally negative response to his proposed strategy. The HOME team’s surprise move to sell Homebase to Wesfarmers of Australia does raise the question of whether the subsequently de-levered Argos rump could be taken private, which we examine in this note.
However, our main finding having done this work is that divisional profits as shown by HOME may have been boosted for Argos by re-allocation of Financial Services EBIT and that this undermines the overall valuation. Our FV rises to 135p from 95p.

BE

We have tested the various elements of Buy-Out arithmetic here. Private Equity could generate significant returns if the Argos Transformation Plan is successfully delivered in private ownership. But this is based in part at least on the starting point of very low profitability, which both highlights the risks involved for PE and limits the leverage a private vehicle could support initially and hence the exit price for HOME shareholders. Any consideration of the exit value of Argos must also be based on assuming that the Argos business model – which we believe has become more dependent on the contribution of consumer finance – is sustainable in private ownership (see below).

As part of this exercise we have also had a much closer look at the composition of profits as stated by HOME. We believe that the Financial Services (HFS) business achieves far greater profits than stated and that these are re-allocated to Argos (mainly) and Homebase. We have estimated that over half of current year Argos EBIT is in fact re-allocated HFS profits, suggesting that the erosion of product based profitability has been greater than investors would generally believe. (We have received no co-operation from HOME in our analysis which incorporates a number of assumptions which may limit the accuracy of our conclusions.) The implication here is that Argos needs the support of a consumer finance structure to sustain its operations.

BE

Having performed the analysis we feel that there is a bit less to HOME than meets the eye. While HOME management may be motivated to offer for Argos, we believe that the valuations of Argos and HFS have to be considered together by investors rather than assuming a separate valuation for HFS based on its debtor book, because the returns implicit in a separate valuation of HFS would effectively be double-counted as its profits are mainly shown currently within the Argos EBIT.

We assume that Sainsbury has probably done the same work we have managed in a couple of days over the last six months. So we would expect that it does not want to double-count assets either. This said the logic of its approach eludes us so its valuation is likely to as well.

BE

Canaccord also advising caution into the deadline.
PM

Hang on
PM

We assume that Sainsbury has probably done the same work we have managed in a couple of days over the last six months.

PM

That's a bit cheeky no?
PM

But go on
PM

Canaccord
BE

Similar conclusion, slightly more tame argument.
BE

With the clock ticking down to the 5pm deadline on 2 February (or potentially later if agreed by the Takeover Panel), by when J Sainsbury has to decide whether or not to make an increased bid for Home Retail, the answer should soon become clearer as to whether Argos is to continue with its Digital Transformation plan as an independent operator or (potentially) as a subsidiary of J Sainsbury. Home Retail is currently just over three years through its five-year plan, so it is a case of unfinished business at this stage.

This will, of course, be dependent on a number of factors. First and foremost is whether Sainsbury does return with an enhanced bid. Assuming it does, we must see at what level this is pitched and whether shareholders are willing to accept this. In turn, this may depend on the mix of cash and paper offered. Given Sainsbury's own travails and challenges in its core grocery market, we would assume that the higher the mix of cash over paper, the higher the chances of success in securing Home Retail's shareholders' agreement.

BE

The market is not privy to the level at which Sainsbury's rebuffed offer last November was pitched (although press speculation centres at around 130p). There have been three key events since then - the proposed sale of Homebase to Wesfarmers for £340m (c 42p per share); a further profit warning from Home Retail; and market weakness and volatility. These will all play a part in Sainsbury's thinking for what it views as both a "strategically compelling transaction" but also "not a must do deal".

As the potential bidder, it is only Sainsbury's (and its shareholders') view on the strategic compulsion of the transaction that matters. We do not have adequate insight into Sainsbury's strategy to comment in an informed manner, but it is clear from some of its published materials that the company (and its advisors) are serious in their deliberations and justifications on this matter. This has certainly changed our initial scepticism on the probability of a higher, follow-up approach.

BE

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. Our analysis of the value of "rump" Home Retail, excluding Homebase at a £340m value, shows that any bid for the total group above 135p values this rump at a premium to the wider sector, compared with the 13% discount Wesfarmers has proposed to pay for Homebase. Only a "strategically compelling transaction" could justify that in our view.

BE

In light of our 10% forecast cuts following Home's Q3 IMS and some sector de-rating, in the absence of a bid approach we would have cut our fundamental valuation to 100p (from 115p). Ascribing a two in three chance to a bid at the current share price and a one in three chance of no further - or failed - bids, in which case fundamentals would re-apply, this gives our new target price of 134p. We therefore retain our SELL recommendation.

BE

All of which plays into the bear stuff above rather neatly.
BE

There's a quite startling disconnect between what the buyside says HOME is worth -- remember the flush of "we won't sell for less than 200p!" articles a while back -- and the value the sellside sees in the business.
BE

One can be cynical about both sides, of course. Though only the former is talking its book.

11:38AM

[solanki2000] 28/1/2016 12:15

It can't keep rising daily. Some people will take profits, some will hold. There will be a counter bid, the question will be if its at a correct price or not to accept. You'd expect sainsbury to drop anyway as they are the bidders and market thinks they are overpaying when they are clearly not from analysis

[dealer1972] 28/1/2016 11:50

potential that QIA will not back a bid at the number the HOME board want?

[jonny33] 28/1/2016 11:48

Why is the share price tanking today? Edit Sainsbury's has just dropped as well, some news has been released somewhere.

[haywards26] 28/1/2016 11:44

I am very confident the improved bid will be here within days :)

[jonny33] 28/1/2016 11:24

I'm nervous that they may pull out of the deal if the Qatar Investment backers don't see the value for them. If only my crystal ball worked...