HomeBase Shares Rise 10% On Rumors Lowe's Wants To Acquire Retailer
Dow Jones Online News, Friday, July 10, 1998 at 19:41
NEW YORK -(Dow Jones)- Shares of HomeBase Inc. surged 10% Friday, as rumors circulated that Lowe's Cos. will buy HomeBase for $14 a share. Shares of HomeBase, which operates home-improvement outlets, (HBI) closed Friday at $10, up 93.8 cents, on the New York Stock Exchange. On Thursday, HomeBase's shares rose 16.9%. Meanwhile, shares of Lowe's (LOW) lost 81.3 cents, or 1.9%, to $42.188 Friday. They fell 4.7% Thursday.
Rumors Lowe's will buy HomeBase have been going around for a few
weeks, observers said. Paul Foster, a strategist at 10WallStreet.com,
said implied volatility in HomeBase's options, which indicates how
likely options traders think the underlying stock price is to move up or down, has risen to 94 from 75 a month ago. Average implied volatility of HomeBase's options is 53.
A HomeBase spokeswoman declined comment, citing company policy
forbidding discussion of rumors.
Lowe's Vice President and Treasurer Robert Niblock said the company doesn't comment on rumors. But he did say that "the only thing that I'll add beyond that is our expansion plans call for internal expansion."
Some observers said they were confident HomeBase, based in Irvine,
Calif., was in takeover talks. But they questioned whether Lowe's, a
North Wilkesboro, N.C.-based operator of home-improvement warehouses,
would be the buyer. Lowe's typically shuns acquisitions in favor of
internal growth.
In April, Lowe's announced a major expansion into the Western U.S.
The company laid out its plans to build more than 100 locations, with
the initial stores opening in late 1999. Observers said the company
might see the acquisition of HomeBase, which operates 83
home-improvement warehouses in 10 Western states, as a faster way to
expand.
-Philana Patterson; 201-938-5360
Copyright (c) 1998 Dow Jones & Company, Inc.
All Rights Reserved.
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