Sir Tom Hunter, Scotland's richest man, has stoked his feud with Tesco after launching legal action to block the supermarket chain from tightening its hold on Dobbies Garden Centre.
The two sides have been at loggerheads since last year when Tesco launched a £156m bid for Dobbies, only for Sir Tom to build his stake in the group which could prevent a full takeover. Tesco now owns 65 per cent of the company, while Sir Tom, through his investment vehicle West Coast Capital, owns 29.9 per cent.
Dobbies announced a month ago that it intended to launch a £150m rights issue, more than its market capitalisation. Yesterday, it emerged that Sir Tom is seeking a court order to block the proposed fund raising, underwritten by Tesco.
To maintain his stake at current levels after the issue, Sir Tom would have to invest a further £44m. Should he decline, along with minority shareholders, Tesco would be able to lift its holding to 83 per cent of the company.
Dobbies' chief executive, James Barnes, said the parties had held "cordial" discussions in the build-up to yesterday's statement, but were unable to resolve the matter. A spokesman for West Coast said the group had been reviewing the proposal "and concluded it wasn't in the interests of all the shareholders, especially minority shareholders".
The companies are expected to meet in the commercial court in Edinburgh early next week. Mr Barnes said: "We're keen to get this heard as soon as possible, so we can get on with sorting the issue out and managing the business." It must be held before the shareholders can vote on the proposal at the company's annual meeting on 21 May.
Tesco first bid £15 per share for Dobbies in June last year, surprising the market, which had expected private equity interest in the asset.
The supermarket group was forced to lower its acceptance level to 50 per cent of shareholders to secure control of the asset last September, after Sir Tom paid up to 1,845p to take his stake to just below 30 per cent.
Richard Ratner, then retail analyst at Seymour Pierce, said at the time: "We see Hunter's blocking stake as a possible thorn in the side of Tesco."
Sir Tom, with an estimated fortune of more than £1bn, started his career selling trainers from the back of a van before building a chain of sports stores, which he sold to JJB Sports in 1998 for £290m.
The stake in Dobbies was not his first foray into the garden centre business. West Coast Capital bought Wyevale Garden Centres for £311m in 2006, and Blooms of Bressingham, another chain, last year.
Mr Barnes said yesterday he was confident the courts would find in Dobbies' favour: "We've set out the reasons we need to carry out the fund raising. We have an aggressive expansion programme and see this as the best way to raise the cash."
Dobbies, started by James Dobbie in 1865, traditionally buys greenfield sites and develops them, which is a "cash-intensive" strategy according to Mr Barnes. The group spent £30m on the strategy last year and intends to spend more this year, he added.Reuse content