Hunter vs Tesco in the great garden centre row

Now Sir Tom Hunter is suing Tesco. Who'd have thought garden centres could cause so much strife?

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Last Updated: 06 Nov 2012

Sir Tom Hunter, Scotland’s richest man, has gone to court to try and stop Tesco launching a £150m share issue for Dobbies, the garden centre chain that was the subject of a bidding war between the two last year (which Hunter lost). Tesco claims that it needs the cash to finance expansion plans for Dobbies, but Hunter insists the giant retailer is only doing it to try and squeeze him (and other minority shareholders) out of the picture, because it will cost them so much to maintain their current stakes. The irate Scot is even accusing the three Tesco directors on the Dobbies’ board of abusing their powers…

To be fair, you couldn’t blame Tesco for wanting Hunter out of the way. Since losing out in the battle for Dobbies last year, Hunter has been a fully paid-up member of the awkward squad – he’s refused to sell his 29% stake, preventing Tesco from taking the business off AIM (and thus running it as a subsidiary) and giving him power of veto over any shareholder resolutions. It can’t be healthy for any company when the two biggest stockholders are at each other’s throats – and clearly the relationship between Tesco and Hunter’s vehicle West Coast Capital has broken down completely (his lawyer said yesterday that future co-operation between the two would be ‘unthinkable’).

The main point at issue appears to be: does Dobbies really need the money? The board claims it has acquisition targets that it needs to move on quickly, but WCC is arguing that it’s actually planning to spend most of the money repaying a loan from Tesco – even though it’s under no pressure to do so.

And just to complicate matters even further, Hunter also happens to be the biggest shareholder in Wyevale, Dobbies’ biggest competitor – which could potentially benefit if Dobbies can’t afford to make acquisitions. So Hunter has a slight conflict of interest between his responsibilities to Wyevale and his responsibilities to Dobbies – as Tesco has been quick to point out.

Still, if the share issue goes ahead, it will be very bad news indeed for Hunter – either he coughs up and retains his current stake, which will cost him about £44m, or he gets diluted to a level at which Tesco will be able to do whatever it wants, at which his shares will plummet in value. So you can see why he’s so keen for the judge to stop this happening.

Either way, this is turning into a real heavyweight scrap, with both sides coming out swinging. It’ll be fascinating to see who throws in the towel first...

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