GUS has announced details of its demerger plans, and released prospectuses for the two new businesses: Argos Retail Group (now renamed Home Retail Group) and Experian. Experian plans to raise £800m via a new share issue. Around £600m of this will be set aside as a rights issue for existing shareholders, in proportion to their shareholdings.
The price of each share is yet to be decided, but GUS says that it will fall within the range of 475p to 610p. The remaining £200m, plus any shares from the £600m rights issue that are not taken up by existing shareholders, will be made available to new shareholders. The deadline for receipt by GUS for applications for the rights issue is 3pm on 5 October. GUS's shares will be suspended from trading after the markets close on 6 October, and the shares in the new entities of Home Retail Group and Experian will begin trading when the markets open on 11 October.
GUS has issued trading updates for both Home Retail and Experian to coincide with the release of the prospectuses. At Home Retail, underlying sales at Argos rose by 5 per cent for the five months to 31 August, and underlying sales at Homebase fell by 3 per cent in the six months to 31 August. Meanwhile, at Experian, sales grew by 18 per cent in the first five months of the current financial year, with organic growth of 7 per cent.
Richard Ratner, analyst at Seymour Pierce, has constructed two scenarios for valuing GUS. The 'bear' scenario values Home Retail on a PE ratio of 12.5 and Experian on a PE multiple of 20. This puts a value of 297p per GUS share on Home Retail, and 588p per GUS share for Experian, making a total of 855p a share. But the 'bull' scenario - a PE multiple of 15 for Home Retail and 25 for Experian - gives a value of 357p per GUS share for Home Retail, and 748p per GUS share for Experian. This gives a total value of 1,105p for each GUS share.
Shunil Roy-Chaudhuri
