Bank says Kingfisher's Castorama bid is fair

Kingfisher, the UK retail giant, will this morning launch a £2bn rights issue after an independent bank ruled last night in its favour over its £3.2bn bid to take over Castorama, the French DIY group.

NM Rothschild was given a month to judge the fairness of Kingfisher's offer of €67 per share for the 45 per cent of the company it does not already own. The bank delivered its preliminary findings to both sides on Friday night to give them an opportunity to make final representations.

Castorama had hoped that Rothschild would recommend a higher price. However, the collapse in stock markets in the past few weeks made such a recommendation increasingly unlikely. The Castorama camp is thought to be devastated by the ruling but felt that the current stock market conditions left it with no option but to accept the decision.

Kingfisher has pledged to take control of Castorama in order to drive the synergies from the deal that have not been achieved under partial ownership. Kingfisher will now push ahead with a deeply discounted rights issue to fund the deal.

Kingfisher's shares have fallen so far since the deal was announced that there are now questions over the level of discount required to get a rights issue raising away.

Castorama shares closed at €64.1 on Friday, indicating the market did not believe Kingfisher's offer is too low. .

Kingfisher will now be expected to press ahead with the demerger of its electrical retailing operation, which includes Comet in the UK and Darty in France. Its preferred option is to float the business on the French stock market.