(Bloomberg)—Groupe Fnac SA is in talks to buy Darty Plc for about 535 million pounds ($811 million) in shares, a deal that would create France’s leading electronics retailer.
Darty, No. 63 in the Internet Retailer 2015 Europe 500 Guide, agreed to negotiate after Fnac made a proposal valuing the London-based company at 101 pence a share, the companies said Wednesday. An earlier approach was rejected because it was too low, according to people familiar with the matter.
Darty shares soared as much as 19% in London, where the company is listed even though it has no U.K. stores. The potential deal would more than triple Fnac’s store numbers, adding 400 outlets to the 186 it already operates. Darty, which had Internet Retailer-estimated 2014 web sales of 385 million euros, would bring annual sales of about 3.5 billion euros ($3.9 billion) to Ivry-sur-Seine, France-based Fnac, which had revenue of 3.9 billion euros in 2014 from selling electronics, books and music. Fnac’s 2014 web sales were an Internet Retailer-estimated 198.0 million euros, according to Top500Guide.com data.
A combination would pool Fnac’s strength in electronics and media with Darty’s strong position in appliances, according to Charles Allen, an analyst at Bloomberg Intelligence.
‘Execution risks’
Fnac’s offer is 25% above Tuesday’s closing level for Darty, whose shares rose 18% at 95.50 pence at 3:10 p.m. in London. Fnac fell 4.6% to 50.59 euros in Paris.
Darty said talks between the companies will focus on reviewing the risks of the transaction to determine whether it would be acceptable for Darty shareholders.
A possible hurdle could be opposition from regulators. Both companies have a large store presence in the greater Paris region, although they face much stiffer competition from online retailers than in the past, Allen said.
“The online-only part of the market has become so much more significant that one shouldn’t base it only on stores,” he said.
Darty’s biggest shareholder, Knight Vinke Asset Management LLC, “strongly supports” the principle of combining the retailer with Fnac, a representative for the investment firm said by email. Knight Vinke, which owns 14.4% of Darty’s shares, has previously agitated for change at the company.
In addition to the Darty electronics chain in France, Darty operates Vanden Borre stores in Belgium and BCC in the Netherlands. The company retained its U.K. listing after selling the unprofitable Comet chain there in 2012.
Fnac, whose operations extend as far as Brazil and Morocco, has proposed paying 1 of its shares for every 39 Darty shares.
Morgan Stanley and UBS Group AG are advising Darty, with NM Rothschild & Sons Ltd. and Ondra Partners acting for Fnac.