Billionaire entrepreneur Sir Tom Hunter today bowed to Tesco after agreeing the cut-price sale of his stake in the Dobbies garden centre chain to the grocery giant.
Sir Tom's West Coast Capital (WCC) investment company has agreed to sell its 29.2 per cent holding in Dobbies to Tesco for £36.3 million, allowing the retailer to take the company private.
Tesco already owns 65.5 per cent of the Midlothian-based chain. The 1200p a share offer accepted today by WCC values Dobbies at £124.5 million and is well below Tesco's original 1500p offer tabled last June - which Sir Tom said undervalued the business's long-term potential.
Last week Sir Tom lost a legal battle with Tesco to prevent a £150 million open offer of new shares to raise funds from investors for expansion.
It would have cost around £40 million for WCC to buy the extra shares and maintain its stake in the business, which could otherwise have fallen to around 15 per cent.
It is unclear whether the planned fundraising exercise with shareholders will go ahead following Sir Tom's acceptance of the offer. A Tesco spokesman said it was a matter for Dobbies' board.
The exit of the entrepreneur, who owns the Wyevale and Blooms of Bressingham chains, removes a thorn in the side of the retail giant and allows it to press on with its plans for the group.
It aims to use the stores to capitalise on the current boom in gardening and related demand for "green" products, such as composting kits and water butts.
Tesco has pledged to maintain the Dobbies brand, which dates back to 1865, but wants to expand the group beyond its current 23 sites, which are split between Scotland and England.
Further deals are in the pipeline for Dobbies after its latest £8 million purchase of the Sandyholm garden centre at Crossford, in Lanarkshire, last month. The group now has almost 2,000 staff.
Panmure Gordon analyst Philip Dorgan said: "Tesco is acting to tidy up the Dobbies stand-off, which is obviously a good thing, but it is a minor event in the story of Tesco.
"It is a minor acquisition for a company of Tesco's size, particularly when last week it announced it was spending £1 billion on an acquisition in Korea."