Kingfisher bids for Mr Bricolage to bolster French presence

* Agrees 15 euros a share offer with Mr Bricolage's biggest investors

* Proposes subsequent mandatory offer to buy out minority holders

* Enterprise value of deal is 275 million euros

* Kingfisher (LSE: KGF.L - news) shares up 2.6 pct, Mr Bricolage shares suspended (Adds detail, Kingfisher, Mr Bricolage CEO, analyst comments, shares)

By James Davey and Dominique Vidalon

LONDON, April 3 (Reuters) - Kingfisher, Europe's No. 1 home improvement retailer, moved to strengthen its position in France, its most profitable market, with a 275 million euros ($379 million) takeover bid for smaller rival Mr Bricolage .

The owner of B&Q, the market leader in Britain, already trades as Castorama and Brico Depot in France where it is jostling for the top spot with Group Adeo, which owns the Leroy Merlin chain.

Mr Bricolage's Chief Executive Jean-Francois Boucher told reporters on Thursday that based on 2012 data his firm had an 11.3 percent market share, Kingfisher around 34 percent and Group Adeo about 35 percent.

Kingfisher, whose own estimate of its market share is much lower, said it had entered exclusive negotiations with Mr Bricolage's two main investors to buy their shareholdings for 15 euros a share.

A deal would allow the UK firm to take out a rival, add buying scale and provide a platform for an international franchise model. Mr Bricolage owns 81 stores and has 435 franchised stores, including some overseas.

Any deal is also likely to raise competition concerns but both Kingfisher and Mr Bricolage expect French authorities to follow a recent pattern of looking at concentration issues on a local market basis rather than looking at the national market.

Castorama and Brico Depot stores tend to be large and out of town while Mr Bricolage outlets tend to be smaller and in urban areas, a Kingfisher spokesman noted.

"This would add a third, complementary strong business alongside Kingfisher's existing two successful brands in France," said Chief Executive Ian Cheshire.

The firm would also argue that only Mr Bricolage's directly owned stores should be considered in market share calculations.

Nevertheless, Kingfisher expects the acquisition process to take until the end of its 2014-2015 financial year.

Jean-Claude Bourrelier, chairman of Bricorama (Paris: FR0000054421 - news) , which has a 3.5 percent share of the French DIY market, described the deal as "bad news" and said it would hurt competition.

STRATEGIC MERIT

Kingfisher, which trades from 1,124 stores in nine countries in Europe and Asia, makes about 50 percent of its annual profit in France. Its shares rose 2.6 percent to 443 pence at 1124 GMT, valuing the business at 10.5 billion pounds.

Trading in Mr Bricolage was halted on the Paris bourse and will resume on Friday. Its market value is 136 million euros.

Analysts said there was clear strategic merit in buying the firm, which made a pretax profit of 17.2 million euros in 2013, on revenue of 552.1 million euros.

Mr Bricolage's 69 franchised stores in 10 other countries would also provide Kingfisher with a useful entry point into new markets, including Belgium and Bulgaria.

Analysts at Deutsche Bank (Xetra: DBK.DE - news) reckon the deal should enhance Kingfisher's earnings by about 2 percent in its 2015-16 year.

"This is good news, coming on the back of a couple of months of improving do-it-yourself data in what remains a challenging French market," they said.

Kingfisher, which last week posted a 4 percent rise in annual profit, proposed to acquire 41.9 percent of Mr Bricolage's equity from the Association Nationale des Promoteurs de Faites Le Vous-Mene (ANPF), a group of franchisees, and 26.2 percent from the Tabur family.

It would then make a mandatory offer to buy shares held by minority shareholders at the same 15 euros a share price.

At this level, including net debt of 120 million euros, the enterprise value of the deal would be 275 million euros.

The plan, which is currently a non-binding agreement, includes keeping Mr Bricolage's existing franchisee and affiliate network.

The two companies will meet with their respective works councils in France and improved commercial terms will be proposed to the franchisees. Depending on the outcome, a binding agreement would be entered into.

($1= 0.7263 Euros) (Editing by Elaine Hardcastle)