Acquisition Resources

The boards of directors of Tesco PLC and Dobbies Garden Centres plc have announced that they have reached agreement on the terms of a recommended cash offer for Dobbies by Tesco Holdings Limited at a price of 1,500 pence in cash for each Dobbies Share, valuing the entire issued and to be issued share capital at approximately £155.6 million. 

As a first step, Tesco Holdings has contracted to acquire and has options to acquire a 22.6 per cent. stake in Dobbies and has received irrevocable commitments over a further 2.7 per cent.

Commenting on the Offer, Sir Terry Leahy, Chief Executive of Tesco, said:“This is an exciting opportunity for Tesco. Dobbies is an excellent business with a first-class management team and a great brand that we will retain and develop from its Scottish base. The brand name is strong and already well-respected in the local communities in which Dobbies operates. The increasing popularity of gardening, and in particular the trend towards environmentally friendly products, makes this an attractive sector for Tesco to invest in. The deal is an important part of our strategy to provide customers with greater access to affordable energy saving and environmental products.

“Garden centres are ideally placed to support this because for many people gardening is the way they express their desire to be green. By offering products such as water butts, composting kits and organic fertilizers, garden centres can meet this increasing demand. They can also provide a route into other carbon-efficient products like home insulation, domestic wind power, solar panels and ground source heat pumps, creating further opportunities for growth. 

“Tesco has a proven track record of growing businesses, product innovation and improving our offer to customers internationally. With our backing and support, the management team will invest in the development of Dobbies in order to realise more quickly its full potential, create value for shareholders and grasp the opportunities offered by a shift towards green consumption.”

Alex Hammond-Chambers, Chairman of Dobbies, said: “We are recommending the Tesco offer because we feel it is an excellent deal for Dobbies shareholders, customers and staff and because a stronger and better business can be built as part of the Tesco Group.

“This deal will allow our Scottish success story to grow, bringing new stores and exciting new products across the UK.

“We look forward to sharing Tesco’s wide expertise. Together we can develop our store portfolio, supply chain, systems and on-line business and over time offer customers a wider range of products at keener prices.”

The offer represents a premium of approximately 23.2 per cent. to 1,217.5 pence, being the closing price per Dobbies Share on 29 May 2007, the business day prior to Dobbies’ announcement that it had been approached; and an enterprise value which is a multiple of approximately 17.5 times Dobbies’ EBITDA for the twelve months ended 30 April 2007.