Steinhoff buying Darty, drops HRG

Late on Friday afternoon Steinhoff International Holdings announced that it would be going forward with one deal and dropping another. The deal being dropped is the one for Argos from HRG where Steinhoff were looking to spend around 1.4 billion Pounds. Remember that Sainsbury had already made an offer to HRG, the market was pricing in a pricing war, so Steinhoff probably would have had to spend more to complete the deal. This deal with HRG would have been around 10% of the company's market cap and the Darty deal around another 5%, it looks like Steinhoff decided to pick one deal and go for the company where they have better synergies.

The cheque book is being taken out for Darty at a cost of 673 million pounds - Steinhoff International holdings offer for Darty PLC. Darty is another company that was on the verge of being bought by someone else, with French retail group Fnac offering 558 million pounds last year and getting the boards backing. The Steinhoff offer is 19% higher and is an all cash offer, where the Fnac offer only has a cash component of 66 million pounds, it is unlikely that Fnac will be able to come with a counter offer that beats the Steinhoff one, even though they have told shareholders to expect one. Schroder who own 14.14% of Darty have put their weight behind Steinhoff making the deal look set to go through.

The idea is to combined the furniture offering of Conforama and the "white goods" offering of Darty to have a more complete product offering for the consumer, bringing more foot traffic to stores. The hope is to create further synergies through Steinhoff's existing distribution lines and get better prices from manufacturers as the combined group now has a stronger negotiating position. Great to see, Steinhoff using their new listing to expand in Europe.