Shares digital

Scottish entrepreneur Tom Hunter may sell his shares in Dobbies garden centre, concluding a lengthy battle with supermarket Tesco, John Marshall writes.

Dobbies wants to raise £150 million through an open offer. Hunter has the dilemma whether to participate and maintain his current 29.16% stake, or allow Tesco, which is underwriting the offer, to dilute it.

Tesco last year acquired 65% of the business. Hunter paid a higher price for much of his stake, but refused to make a formal bid for the group. He bought rival operator Wyevale in 2006 and was expected to add Dobbies to his portfolio of garden centres.

Dobbies has decided not to a pay a dividend in order to conserve cash for its expansion plans, which has already seen £52 million invested in the past two years. There is therefore little attraction for Hunter in subscribing to the issue especially as it will be used to fund competition for Wyevale, his garden centre group. Hunter might decide to sell his stake to Tesco rather than continue to indulge in shadow boxing.

The latest results from Dobbies demonstrate both the impact of the weather on garden centres and underline why the group was amenable to a bid.

In the six months to April 07 the group enjoyed underlying sales growth of 10.9% helped by a mild weather in March and April. However trading in the second half was decimated by the poor summer weather. As a result underlying sales grew by only 1.4% during the year as a whole.

The long term future for garden centres should be encouraging as gardening appeals not only to the retired whose active life expectancy is growing, but also a younger generation interested in growing vegetables.