UPDATE 3-Fnac bids for Darty to form French electrical goods leader

  • Reuters
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UPDATE 3-Fnac bids for Darty to form French electrical goods leader
Credit: © Reuters.

(Adds reaction from shareholder Knight Vinke, updates shares)

By Pascale Denis and Alexandre Boksenbaum-Granier

PARIS, Sept 30 (Reuters) - French books and music retailer Fnac FNAC.PA said it had made a proposal to buy Darty DRTY.L in a deal that values the electrical goods retailer at 533 million pounds ($808 million) and could create a French market leader in white goods.

Fnac said the combined group would have a presence in seven countries and overall sales of more than 7 billion euros, generating economies of scale and large synergies.

"Fnac believes the combination of Fnac and Darty constitutes a compelling strategic and financial opportunity for both groups by creating a leader in the French electronics, editorial and home appliances retail market," Fnac said in a statement.

London-based Darty said in a statement that its board has considered the proposal and concluded it should further explore the benefits of a potential hook-up with Fnac.

European activist investor Knight Vinke, the main Darty shareholder with 14.35 percent of the capital, said it backed the takeover proposal.

"Knight Vinke strongly supports the principle of combining Darty with Fnac and encourages both sides to pursue their discussions in good faith," said a Knight spokesperson.

Darty is Europe's third-largest electrical goods retailer, with some 400 stores in Europe, and earns 70 percent of its revenue in the French market. It competes with Metro's MEOG.DE Media-Saturn and Britain's Dixons DC.L .

"The operation makes sense from an industrial point of view," said Christian Jimenez, head of Diamant Bleu Gestion.

Analysts say combining the two groups would put the new firm in a stronger position to negotiate prices with electronics makers like Apple AAPL.O and Samsung (KS: 005930 ) 152380.KS , as well as white goods suppliers like Bosch BOSH.NS and Electrolux ELUXb.ST , and would drive down logistics and Internet costs.

One said that a merger could also lead to job cuts at the headquarters of the two groups, in IT and other departments.

Fnac said it had proposed to Darty's board to pay one Fnac share for every 39 Darty shares, valuing each Darty share at 101 pence based on Fnac's Tuesday closing share price of 53 euros.

In addition, Darty shareholders would be entitled to retain the final dividend of 2.625 cents payable on Nov. 13, 2015 to those shareholders on the register as at 23 October 2015.

Fnac said its offer represented a 27.4 percent premium over Darty's Monday closing prices of 81 pence. Darty shares were up 19 percent at 96 pence by 1455 GMT.

One analyst said Fnac might have to sweeten its bid by including a cash portion.

In late 2006-early 2007 Darty stock traded above 360 euros.

"At first glance, the offer doesn't seem that appealing as Darty's real estate value alone represents a large part of the value proposed by Fnac, we believe about 100 pence per share," one Paris-based trader said.

Fnac shares were 4.57 percent lower in late afternoon trade. ($1 = 0.6597 pounds) (Writing by Geert De Clercq and Dominique Vidalon; Editing by Andrew Callus and Mark Heinrich)

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