Bid to block Dobbies cash call

Billionaire investor taking legal action over £150m share offer

By Russell Lynch

Published:

Garden centre chain Dobbies is set for a legal clash with billionaire entrepreneur Sir Tom Hunter over its plans to raise £150million from shareholders.

Sir Tom, who owns 29.9% of the chain, is attempting to block an open offer announced by the Midlothian-based group in April to strengthen its balance sheet and fund expansion.

Supermarket giant Tesco owns 65% of the chain after a £155.6million takeover deal last year, although Sir Tom said at the time the deal undervalued the business and resisted Tesco’s offer for his shares.

It will cost Sir Tom’s West Coast Capital (WCC) investment vehicle about £44million to take up extra shares and maintain its percentage stake in the business. If it does not, its holding could fall to about 15% and Tesco’s could rise to 83%.

Sir Tom, recently named Scotland’s richest man with a fortune estimated at £1.05billion, is seeking an interim order to block the proposals, although Dobbies said it would make a robust defence of its plans at a court hearing. A WCC spokesman said: “We do not believe that this offer is in the best interests of shareholders, in particular minority shareholders, and hence the legal action.”

Dobbies said its proposals offered funding on attractive terms in current market conditions and it hoped for an early resolution to the dispute to focus on running the business. The garden-centre chain has about £110million in debt, but is looking for the extra funding to expand beyond its 24 sites, which are split between Scotland and England.

Dobbies made its latest acquisition move with the £8million purchase of the Sandyholm garden centre, in Lanarkshire, last month and further deals are in the pipeline. The group now employs almost 2,000 staff.

A Tesco spokesman said: “We are surprised that WCC, which says it is committed to long-term growth at Dobbies, should seek to prevent it raising fresh funds.”

Dobbies plans to issue up to 12.45million shares at £12 each to raise the cash, with the offer being fully underwritten by Tesco.

In the year to October 31, Dobbies posted a 12% fall in pre-tax profits to £3.8million, as last summer’s poor weather hit the business.

Sir Tom controls about 110 garden centres through the Wyevale and Blooms of Bressingham chains.