Focus targets Homebase after Wickes yields to £289m bid

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Focus Do It All, the DIY chain, is considering making a bid for its bigger rival Homebase, after yesterday announcing a deal to swallow Wickes.

Focus Do It All, the DIY chain, is considering making a bid for its bigger rival Homebase, after yesterday announcing a deal to swallow Wickes.

Just three months after seeing off a hostile offer from Focus, Wickes was yesterday forced back into its arms. It agreed to a £289m cash offer from Focus, worth 495p a share, to take it private. Analysts said Wickes had no choice, in the face of a rapidly consolidating industry, but to conclude a deal with Focus, as the competitor had a 39 per cent stake in Wickes.

It is understood Wickes had looked at bidding for Homebase, which was recently put up for sale by Sainsbury's, but decided it could not act because it was constrained by the large and hostile Focus shareholding. The Focus stake also prevented Wickes from pursuing a bid for Great Mills, the smaller DIY chain put up for sale in July.

Graham Lee, managing director of Focus' private equity backers, Duke Street Capital, said: "I don't see any reason to stop here. We're still in buy and build mode. We have the resources for other deals."

One insider said Focus would first look at bidding for Homebase, which has a £1bn price-tag and a 12 per cent market share, although it is likely to attract several other potential buyers. The combined Wickes-Focus group would have 11 per cent of the market, while B&Q dominates with 24 per cent.

The source said: "Even after combining Wickes and Focus, it would be difficult to get up to B&Q on an organic basis. The Office of Fair Trading has got to take that into account, otherwise no one can be an effective competitor to B&Q."

The OFT would need to clear any Focus bid for Homebase. Failing clearance, Focus would look at buying Great Mills, which is owned by building materials group RMC and has just over 3 per cent market share.

Focus built up its stake in Wickes during its failed bid, which was eventually worth 430p a share. Wickes said yesterday: "The board of Wickes' assessment was that it would be difficult to participate in the consolidation process as a public company given Wickes' current ownership structure."

Analysts said the sale of Homebase and Great Mills may allow the entry of US competitor, such as Home Depot, into the UK market.

Bill Grimsey, Wickes' chief executive, said: "Since we rejected the previous Focus offer, the industry structure has changed. It has moved very fast." Mr Grimsey will net £1.3m from his share options in Wickes as a result of the takeover.

Mark Charnock, an analyst at Charterhouse Securities, said: "Wickes could not have initiated very much else, given their shareholding structure. It was probably a case of jump before you are pushed. But they got a good price."

Focus said it will retain the Wickes brand name, its separate head office, and its 131 stores. It said the deal was not a cost-cutting exercise, but would allow the enlarged group to offer a wider range of products.

The Focus bid came at a 19 per cent premium to Wickes' closing share price on Thursday. The new offer has an enterprise value of about £339m, against £303m at the last bid.