Sainsbury’s share price: Home Retail purchase talks stall over price

J Sainsbury’s (LON:SBRY) planned acquisition of Home Retail Group (LON:HOME) has stalled due to a disagreement over the proposed acquisition price. According to inside sources cited by the Financial Times, the two companies have remained entrenched in their positions, with a wide gap between their respective valuations of the FTSE 250-listed Argos owner. Nonetheless, talks are understood to remain ongoing and a break-through is still possible before the 17:00 GNT deadline on February 2.

Sainsbury’s stunned the City earlier this month when it revealed it had made an approach for Home Retail in November. After the initial proposal was rebuffed, the blue-chip grocer was expected to make a new bid this week. A number of Home Retail’s top investors have called for the prospective buyer to raise its offer to as much as 220p a share, which would imply a rough £1.7 billion valuation of the Argos owner. However, Sainsbury’s has indicated that it is unwilling to pay more than around 150p a share for Home Retail, which would value the retailer’s equity at £1.22 billion.

Following today’s development, hedge fund Odey Asset Management increased its short position in Home Retail, citing the risk that Sainsbury’s will fail to buy the company. “We are skeptical a deal will be agreed, because Sainsbury’s shareholders won’t support a higher bid,” founding partner Crispin Odey was quoted by Bloomberg as saying.

As of 13:23 GMT, Sainsbury’s share price was 2.28 percent up at 242.10p, while that of Home Retail was four percent down at 136.80p.
As of 13:45 GMT, Friday, 29 January, J Sainsbury plc share price is 242.10p.