Shares in Chinese e-commerce giant JD.com (JD) were higher today despite a potential $500 million acquisition of U.K. supermarket group Sainsbury’s Argos retail chain biting the dust.
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Digital Orders
The British chain, with stores nationwide, said it was no longer in discussions with JD to sell Argos, which it bought for £1.1 billion in 2016.
Argos sells a range of general merchandise items from electronics to toys via a digital catalogue format. Customers choose their orders, make payments and then wait for staff to deliver their products from on-site warehouses. Customers can also order online to pick up in store or for home delivery.
Argos is the U.K.’s second-largest general merchandise retailer, behind Tesco, with the third most visited retail website in the U.K., according to Sainsbury’s. It retains almost 200 standalone stores and more than 1,100 collection points, mostly in Sainsbury’s stores.
Sainsbury’s latest accounts valued the chain at £344 million or nearly $500 million.
On Saturday September 13, Sainsbury’s, the U.K.’s second-biggest supermarket, said it was in talks with JD.com over a sale that would speed up the transformation of Argos.
Talks Terminated
However, just 24 hours later it said the deal was off. In a statement it said: “JD.com has communicated that it would now only be prepared to engage on a materially revised set of terms and commitments which are not in the best interests of Sainsbury’s shareholders, colleagues and broader stakeholders. Accordingly, Sainsbury’s confirms that it has now terminated discussions with JD.com.”
This is the second time in around 12 months that JD.com has pulled out of a deal for a British retail firm. Last year, it decided not to go ahead with a move to buy white goods and electronics retailer Curry’s.
That could be down to uncertainty over the strength of the U.K. economy and consumer confidence, but it is clear overseas M&A is a focus as it looks to boost its flagging share price – see below:
“Sainsbury’s rejection statement gave the impression that Chinese retailer JD’s offer wasn’t in the best interests of shareholders, staff and stakeholders. That implies the price wasn’t high enough, there was no guarantee about retaining jobs, and nothing to reassure suppliers who had long-standing relationships with Argos that they would still be used,” said Dan Coatsworth, investment analyst at AJ Bell.
Is JD a Good Stock to Buy Now?
On TipRanks, JD has a Moderate Buy consensus based on 12 Buy, 2 Hold and 1 Sell ratings. Its highest price target is $60. JD stock’s consensus price target is $41.23 implying a 22.45% upside.
