Argos offers pounds 431m to beat bid

ARGOS, the catalogue retailer, unveiled the final part of its defence against Great Universal Stores' pounds 1.6bn bid yesterday with plans to return pounds 431m to shareholders if they turn down the GUS offer.

The cash return of 150p per share came as Argos unveiled an upbeat profit and dividend forecast for the first six months of this year. It also claimed the implied value of an ongoing share in Argos was 700p including the cash return, far higher than GUS' 570p offer.

As Argos shares dipped 2p to 646p, most analysts said they expected GUS to increase its bid next week with some saying the home shopping group may have to add up to pounds 1 per share to its current offer.

An upbeat Stuart Rose, Argos' new chief executive, said: "I think our chances [of fighting off the bid] are extremely good. I feel bullish." Urging shareholders to reject the offer he added: "GUS has misjudged it. The offer woefully under-values the business."

Argos's institutional shareholders appeared supportive yesterday and most said the new management team had raised the stakes significantly since the bid battle started. "They are making a reasonable show of their defence and I think GUS might have to pay up quite a bit more to get it," said one senior fund manager.

Lord Wolfson, GUS chairman, maintained the pressure with another attack: "It is extraordinary that, after a series of profits warnings, Argos believes it deserves a blue chip price earnings multiple similar to M&S, Kingfisher and Boots."

He said the profits forecast was "imaginary" and the calculation of an implied Argos share price "totally unrealistic".

Analysts at stockbroker NatWest Securities criticised Argos, saying it was returning too much cash to shareholders and that GUS might not need to raise its offer at all to win. "They have overdone the cash distribution placing the company in a perilous financial position. They have shot themselves in the foot. GUS may even say its 570p or that's it."

Argos admitted that returning pounds 431m to shareholders would give the company debts of more than pounds 300m and negative net assets. However, it said cash generation was strong and interest cover would stand at 5.5 times.

Under takeover rules, GUS has until next Thursday to make its final offer.

One analyst said: "If they walk away having bid 570p they really do look rather opportunistic. There is now a case for saying that GUS needs Argos more than Argos needs GUS, given the competitive threat which Argos poses through the extension of home delivery and through its joint venture with Littlewoods."

Separately, Argos announced that it will close its two First Stop stores at a cost of pounds 2m. These were a test of a lower priced warehouse style operation. The company also said that Peter Birch, the former Abbey National chief executive, would succeed Sir Richard Lloyd as chairman in May, if the GUS bid were defeated.

Argos is forecasting first half profits of pounds 35.9m, an increase of 27 per cent. The dividend will see a 15 per cent increase to 21.2p, it said.

GUS shares closed 6p higher at 760p.

Start your day with The Independent, sign up for daily news emails
Voices
Lucerne’s Hotel Château Gütsch, one of the lots in our Homeless Veterans appeal charity auction
charity appeal
Arts and Entertainment
Tony Hughes (James Nesbitt) after his son Olly disappeared on a family holiday in France
tv
News
people

Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt

Sport
Scunthorpe goalkeeper Sam Slocombe (left) is congratulated by winning penalty taker Miguel Llera (right)
football
PROMOTED VIDEO
Arts and Entertainment
The Apprentice candidates Roisin Hogan, Solomon Akhtar, Mark Wright, Bianca Miller, Daniel Lassman
tvReview: But which contestants got the boot?
Life and Style
A woman walks by a pandal art installation entitled 'Mars Mission' with the figure of an astronaut during the Durga Puja festival in Calcutta, India
techHow we’ll investigate the existence of, and maybe move in with, our alien neighbours
Arts and Entertainment
Jim Carrey and Jeff Daniels ride again in Dumb and Dumber To
filmReview: Dumb And Dumber To was a really stupid idea
Arts and Entertainment
Sir Ian McKellen tempts the Cookie Monster
tvSir Ian McKellen joins the Cookie Monster for a lesson on temptation
News
i100
Travel
Tourists bask in the sun beneath the skyscrapers of Dubai
travelBritish embassy uses social media campaign to issue travel advice for festive holiday-makers in UAE
News
ebooksNow available in paperback
Arts and Entertainment
Jennifer Saunders stars as Miss Windsor, Dennis's hysterical French teacher
filmJennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress
Life and Style
tech
Sport
Nabil Bentaleb (centre) celebrates putting Tottenham ahead
footballTottenham 4 Newcastle 0: Spurs fans dreaming of Wembley final after dominant win
Voices
Jimmy Mubenga died after being restrained on an aircraft by G4S escorts
voicesJonathan Cox: Tragedy of Jimmy Mubenga highlights lack of dignity shown to migrants
Life and Style
Sebastian Siemiatkowski is the 33-year-old co-founder and CEO of Klarna, which provides a simple way for people to buy things online
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Carlton Senior Appointments: Sr Wealth Manager - San Francisco - Inv AdvisoryFirm

$125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager – In...

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Day In a Page

Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
Susie Wolff: A driving force in battle for equality behind the wheel

Susie Wolff: A driving force in battle for equality behind the wheel

The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

'No abs Adam' plans to muscle in on Usain Bolt's turf

After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
Calls for a military mental health 'quality mark'

Homeless Veterans campaign

Expert calls for military mental health 'quality mark'
Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

Meet Racton Man

Analysis shows famous skeleton was a 6ft Bronze Age superman
Garden Bridge: St Paul’s adds to £175m project’s troubled waters

Garden Bridge

St Paul’s adds to £175m project’s troubled waters
Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

Stuff your own Christmas mouse ornament

An evening class in taxidermy with a festive feel
Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

Joint Enterprise

The legal doctrine which critics say has caused hundreds of miscarriages of justice
Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

Freud and Eros

Love, Lust and Longing at the Freud Museum