Tesco plans to take full control of Dobbies after the Scottish billionaire Sir Tom Hunter agreed to sell his 29.2 per cent stake in the garden centre chain.
The retail giant is to pay Sir Tom's investment vehicle, West Coast Capital, £12 a share for the stake, which would give it 94.7 per cent of Dobbies' equity.
The purchase of Sir Tom Hunter's stake brings to an end an acrimonious power struggle between the world's third largest retailer and the Scottish philanthropist.
Tesco's offer of £12 a share values Dobbies at £124.5m.
Last week, West Coast Capital lost its legal battle to block Tesco and Dobbies from raising £150m through a rights issue, or open offer, unveiled in April. The rights issue was proposed to fund a significant expansion of Dobbies' store network over the next 10 years.
The rights issue meant Sir Tom, who also controls the rival garden centre chain Wyevale, would have had to pay £44m to maintain his existing stake in the retailer. The offer was scheduled to be put to Dobbies shareholders at its annual meeting yesterday, but while the meeting took place a decision on the rights issue was postponed until 26 June.
However, it seems unlikely that the rights issue, which was set at £12 a share, will go ahead given that Sir Tom has decided to sell his stake at £12. If the offer is declared unconditional, Tesco intends to delist Dobbies.
In fact, Tesco attempted to take full control of Dobbies with a £15-a-share, or £156m offer, last June that was backed by Dobbies board. But Sir Tom said it undervalued the long-term potential of the business.
Last month, Dobbies posted total sales up 21 per cent to £83.5m for the year ending 31 October, but its restated pre-tax profits fell by 11.7 per cent to £3.8m.
At yesterday's annual meeting, Dobbies Garden Centres's chairman, Lucy Neville-Rolfe, who is also Tesco legal and corporate affairs director, said that Dobbies like-for-like sales had increased by 15.8 per cent and 30.2 per cent in total for the three weeks to 18 May. She said: "We are making solid progress in delivering out pipeline of new stores."
A Tesco spokesman said: "We believe that this offer is good for Dobbies customers and staff as well as the wider community and the environment as more 'green' technology and services are introduced."
Tesco's chief executive, Sir Terry Leahy, has cited the latent potential of the garden centre market to increase sales of energy efficient and environmentally friendly products.
Last year, Tesco also cut the dividend in Dobbies.
Separately, Sir Tom's West Coast Capital is thought to be poised to sell his loss-making 22-store footwear chain Qube to sports retail JJB Sports. JJB and West Coast Capital declined to comment.Reuse content