Home Retail surges as former Garden Centre exec said to eye Homebase

Argos-owner Home Retail surged on Tuesday following a report that Nicholas Marshall, a former executive of the Garden Centre Group, is mulling a bid for Homebase.

According to the Financial Times, Marshall has been looking at Homebase for the last couple of years and has been holding talks with private equity firms regarding a possible bid.

Investec, which rates Home at ‘buy’, said a splitting up of the group was feasible.

“We conservatively value Homebase at £230m with the balance sheet supporting a group value of £1.45bn (180p/share),” it said.

Investec said the weakness in Home’s share price due to issues relating to Argos does leave it vulnerable to a bid for one of its operating companies or the group as a whole.

CMC Markets analyst Jasper Lawler said although no offer has been made, Marshall "outing himself as a possible bidder implies a deal may not be too far away".

"Profits have been rising under former Tesco exec Echo Lu so there’s a feeling that shareholders might get better value if Homebase was stripped away from Argos which last month forced Home Retail into a shock profit warning before the key holiday season," he added.

At 1033 GMT, Home Retail shares were up 6.2% to 109.30p.