Kingfisher bid faces challenge in court

Kingfisher's £3.2bn bid to buy out the remaining stake in Castorama, the French DIY retailer, hit further problems yesterday when the Castorama chief executive criticized the deal at the group's annual meeting in France. The company also said it would fight the British group through the courts.

Speaking to shareholders in Lille, Jean-Hugues Loyez contested the price and rationale of the bid. On Wednesday, Kingfisher launched a 67 euros per share offer for the 45 per cent of Castorama shares it does not already own, backed by a £2bn rights issue. Yesterday, Mr Loyez said: "From what I read in the papers and hear from analysts, our shares are worth more than 70 euros, and maybe even 75 euros."

Kingfisher took a 55 per cent stake in Castorama in 1998 and agreed then to appoint an independent investment bank to assess any bid for the rest. If the price is deemed fair, Kingfisher can go ahead despite objections from Castorama minorities.

Along with the move on Castorama, Kingfisher also plans to split its business in two, spinning off its electrical stores, which include Darty in France and Comet in the UK.

Mr Loyez said: "I agree as far as the business split is concerned but I don't understand why they would want to invest €5.1bn (£3.2bn) when there are simpler and more creative ways of creating value.

"If the deal were being done in a normal way, if it were friendly, I would have no hesitation in advising shareholders to deliver their shares (to the bid)."

Arguing that Kingfisher's bid is in breach of the 1998 agreement, Castorama is seeking a legal ruling on whether it can appoint an intermediary in the discussions. The court is expected to rule today in Lille.

Kingfisher said: "The agreement states that if the independent bank comes back with a satisfactory fairness opinion, then it doesn't matter whether minority shareholders accept or reject our offer. We would still be able to take management control."

Kingfisher's chief executive, Sir Geoff Mulcahy, did not attend the meeting in France. Helen Jones, company secretary, was sent instead.