Shares in Dobbies Garden Centres rose 17 per cent yesterday on hopes of a £175 million battle for the company between Sir Tom Hunter, the Scottish retail entrepreneur, and Tesco, Britain’s biggest supermarket chain.

Sir Tom was rumoured to have been buying further shares in the market yesterday after snapping up 10 per cent of the Scottish garden centre chain on Wednesday for £17.50 a share.

At close of play on Tuesday, he held 20.6 per cent of Dobbies stock against Tesco’s 22.6 per cent.

The supermarket also holds irrevocable commitments to accept its £15 a share offer from shareholders representing a further 2.7 per cent of the stock and it has the backing of Dobbies’ management.

However, Sir Tom is unlikely to be concerned about the position of Dobbies management, having already gathered a team to operate Wyevale, the garden centre chain he bought last year. He is thought to have approached his fellow shareholders in Wyevale, which include Baugur, the Icelandic investment firm, about putting together a bid to rival Tesco.

Analysts said that Sir Tom could force Tesco to raise its offer for Dobbies. Having bought his original stake at less than £12 a share, he would make a tidy profit.

Shareholders are unlikely to accept the supermarket’s existing offer with the prospect of more cash from the Scottish entrepreneur in the wings.

Analysts said that Sir Tom could make an offer for the company, given that he would require acceptances from only 50 per cent of shareholders to force through a deal.

However, given Tesco’s considerable firepower, it is thought likely that the supermarket group could easily make a counter-bid.

Richard Ratner at Seymour Pierce said that Sir Tom might also be buying shares in an effort to frustrate Tesco’s plans to buy Dobbies at any price.

Mr Ratner said: “There is only one ‘serious’ retailer in this sector [Sir Tom Hunter]. He may well be fearful of having Tesco as a competitor. Thus, were he to get to 25 per cent, it could scupper the deal entirely.”

Sir Tom’s latest plunge into the market for Dobbies stock comes as documents released by Booker, the recently listed cash and carry firm, revealed that he had raised £6.1 million through the sale of shares in the company.

Sir Tom and a group of other investors agreed to sell down some of his stock in Booker if there was sufficient demand from shareholders. As a result, the shareholders yesterday reduced their stake in the company from 67.76 per cent to 52.77 per cent.

Bank of Scotland reduced its stake by the largest amount, raising £26 million by cutting its holding from 12.02 per cent to 4.99 per cent. Commentary, page 57

Analysis

It is crossed forks and secateurs at dawn over Dobbies, but why are Sir Tom Hunter and Tesco so keen to get their hands on a 21-store garden centre chain?

Last week, Andy Higginson, Tesco’s finance director, said the supermarket saw Dobbies as a way to “go after the green pound”. The supermarket believes that eco-friendly, carbon-efficient products such as water butts and solar panels are a major emerging market. It thinks that shoppers will want to make these expensive considered purchases in an environment they already feel offers good service and has “green” credentials.

Meanwhile, as the population ages, gentler hobbies such as gardening will take up an increasing proportion of consumer spending.

In the UK, 2001 marked the first year in which there were more people over the age of 65 than under 16. The EU’s population of over65s is expected to rise by 77 per cent between 2010 and 2050, while the spending power of these new retirees is estimated to have grown sevenfold over the past 20 years. Both Tesco and Sir Tom Hunter want a piece of that eco-friendly green-fingered action.

Tesco, like Sainsbury’s and Asda, is looking for new ways to find growth in the UK.

Sir Tom, who first snapped up stock in Dobbies a year ago, bought the firm’s bigger rival Wyevale last year for £310 million. He also has a 29.9 per cent stake in home shopping group Flying Brands, which sells plants from catalogues and online, and he owns Blooms of Bressingham, a smaller garden centre chain.

He is likely to be concerned that Tesco’s buying power and access to capital will help Dobbies to expand into a serious competitor to his new assets.

Whether Sir Tom seriously believes he can go up against the Goliath of Tesco and win is another question. Analysts suggest that his plan could simply be to frustrate Tesco’s efforts to buy Dobbies. That would not be good news for shareholders in the medium term.

Certainly it must be frustrating for Sir Tom to have a business based in his native Scotland snatched from his reach. The entrepreneur expressed unwillingness to bid more than £15 only a month ago. Is he now really prepared to bid more?

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