Major Shareholder Challenges At Home Group's H&F Deal, Argues Valuation Misses Real Growth Potential

2025-12-31 11:17:41

CAS Investment Partners, which holds roughly 17% of At Home Group Inc. (NYSE: HOME), has formally objected to the company’s proposed acquisition by Hellman & Friedman. The investment firm contends that current deal terms drastically undervalue the company and fail to capture years of operational improvements and long-term expansion opportunities.

The Math Doesn’t Add Up: Why 12.9x Earnings Falls Short

According to CAS Investment Partners’ analysis, the H&F offer implies a valuation of just 12.9x adjusted fiscal 2023 earnings. This multiple assumes an extremely bearish scenario where every business improvement since fiscal 2019 simply disappears. The bears’ case essentially projects that:

Revenue per store reverts to $7.5 million (a step backward from current performance)
EBIT margins drop back to 2019 levels of around 13.1%
Recent competitive advantages evaporate entirely

“This multiple represents a steep discount to both the broader market and most healthy retailers with genuine growth runways,” CAS Investment Partners noted in its communication to the board. By any reasonable standard, paying 12.9x for a business in this category appears misaligned with market norms.

Ignore the Improvements at Your Peril

The investment firm points to concrete evidence that At Home has transformed over recent years:

Consumer Engagement: Unaided brand awareness jumped from 15% to 19% during fiscal 2021, indicating growing market reach and recognition.

Loyalty Growth: The Insider Perks loyalty program exploded from zero members in August 2017 to approximately 9.1 million by the end of fiscal 2021—a testament to customer retention efforts.

E-commerce Overhaul: The company evolved from minimal online presence in fiscal 2019 to offering robust purchase-and-pickup and direct-delivery capabilities.

Merchandise Strategy: EDLP+ pricing introduced new competitiveness and appeal.

Sourcing Efficiency: Direct sourcing expanded from virtually nothing in fiscal 2018 to 20% by end of fiscal 2021, generating hundreds of basis points of margin uplift per item while improving product quality.

Structural Advantage: Competitors like Pier 1, JC Penney, and Bed Bath & Beyond have shut stores or exited markets, strengthening At Home’s relative positioning.

These aren’t trivial changes. They represent the foundation for future growth, not a temporary pop that will fade away.

The Bull Case: Why $70+ Per Share Is More Realistic

CAS Investment Partners sketches out what it views as a grounded bull scenario. Assume:

At Home returns to ~20% annual store growth by fiscal 2023
Revenue per store reaches $8.5 million by fiscal 2027
EBIT margins (excluding pre-opening costs) climb to 14% by fiscal 2027
The balance sheet remains unlevered

Under this path, per-share earnings could approach $6.74 by fiscal 2027. If the market applies a 20x multiple at that point—reasonable for an unlevered, high-growth retailer with 600+ store potential and further revenue-per-store upside—the stock could trade at $135+. Discount that back five years at 13%, and fair value today exceeds $70 per share.

That gap between $70 and the current deal price represents what CAS Investment Partners sees as giveaway territory for shareholders.

A Sweeping Process Was Never Run

CAS Investment Partners emphasizes that the board did not conduct a comprehensive strategic review or actively solicit competing bids. An after-the-fact “go shop” provision doesn’t remedy the lack of a full and fair sales process. The firm has heard from other large investors who share these concerns, raising questions about whether the deal can clear the stockholder vote if these issues remain unaddressed.

What Happens Next

CAS Investment Partners has made clear it will vote against the transaction under current terms and is prepared to take further action if the board doesn’t renegotiate. The firm has invited the board to engage in private discussions and present its alternative analysis, but warned that continued silence could lead to active opposition.

For At Home shareholders, the message is simple: the current price likely doesn’t reflect the company’s true value or its genuine path forward.

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