Sainsbury's reveals interest in acquiring Argos owner Home Retail Group

The supermarket giant said it was now “considering its position” after the shares plus cash offer was knocked back, but said there was “no certainty” it would make another offer for the Argos and Homebase owner.

Home Retail Group confirmed that it received a bid from the grocer, but said it was rejected because it “undervalued Home Retail Group and its long-term prospects”.

Sainsbury’s said in a statement that a combination of the two businesses was “an attractive proposition for the customers and shareholders of both companies, establishing a platform for long-term value creation”.

The statement added: “The combination is an opportunity to bring together two of the UK’s leading retail businesses, with complementary product offers, focused on delivering quality products and services at fair prices, through an integrated, multichannel proposition.”

Sainsbury’s added a deal would “optimise the use” of the combined retail space of the two businesses. “The combined entity would have attractively located stores across the UK, with an enhanced supply and delivery network and a strong presence across food and grocery, clothing, homewares, toys, stationery, electricals, furniture and other general merchandise,” it said.

The supermarket giant believes a potential acquisition would also allow it to sell its products via Argos’ network and install more Argos outlets in its larger stores.

It has until February 2 to submit its intention to make an offer, or confirm that it does not intend to make a second bid. That deadline can, however, be extended, but would require consent to do so from Home Retail Group.

Existing partnership

Sainsbury’s has already been working alongside Home Retail Group after partnering with Argos to open a host of digital stores inside some of its larger supermarkets. It also has concession deals with footwear repair business Timpson and camera shop Jessops.

The grocer owned Homebase until 2000, when it sold the DIY retailer to Schroder Ventures for £750m. A further 28 sites, which were intended to house Homebase stores, were sold to B&Q owner Kingfisher for £219m.

Home Retail Group’s shares soared at their highest rate for more than two years in November following reports of a potential takeover bid.

Shares in the Argos and Homebase parent jumped 7.4% to 111p after suggestions that private equity companies are eyeing bids for the retailer.

Interest was reportedly sparked after Home Retail issued a shock profit warning in October, which it blamed on the unpredictable nature of Black Friday and Christmas trading and the increased investment in marketing Argos’ new same-day delivery service, Fast Track.