Tue, 02 Feb 2016 | BUSINESS SALE
Sainsbury's has been circling the Home Retail Group, owner of Argos and Homebase, for some months now, but this week the company has put forward a fresh offer of £1.3 billion.
The firm's approach last year was rejected but undeterred, Sainsbury's put forward the £1.3 billion offer in a bid to gain control of the group once again. It looks as if the bid has now been successful with an initial agreement reached between the two companies.
Sainsbury's interest is being driven by expected savings by amalgamating Argos stores and supermarket sites. It is also anticipating some efficiencies to be made through selling its own clothing and homeware ranges through Argos.
Steve Clayton, head of equities research with Hargreaves Landsdown, commented on the bid, stating that it was indicative of “bold play” on the part of Sainsbury's.
He added: "It is looking to buy a struggling business when the supermarket itself is fighting strong headwinds.
"The takeover will be a considerable strain on management time when they already have quite a lot on their plate."
The £1.3 billion valuation figure is derived from the £1.2 billion which Sainsbury's would pay for equity in the company as well as a £200 million cost incurred for honouring an existing Home Retail agreement to return this money to shareholders after the sale of Homebase to Wesfarmers, an Australian firm, for £340 million.
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