Sainsbury's in £1.3bn bid for Argos owner Home Retail

Sainsbury's has tabled a proposed deal of up to £1.3 billion to take over Argos parent Home Retail Group.

Sainsbury's has tabled a 'possible offer' of 161.3p per Home Retail share

The supermarket giant has made a “possible offer” worth 161.3p per share for Home Retail.

As part of the cash and shares deal, Home Retail shareholders will own about 12 per cent of the combined group, if it gets the go-ahead.

Home Retail said it “believes in the prospects for the standalone company”, but the possible offer provides an “attractive opportunity” for its shareholders to receive full valuation for their shares.

However, the sale of Home Retail’s DIY chain, Homebase, to Australian business Wesfarmers is said to be a condition of the possible offer by Sainsbury’s.

The £340 million deal, which will see the Homebase name replaced by the Bunnings Warehouse brand, is still awaiting the approval of shareholders. READ MORE: Homebase owner agrees £340m sale of DIY chain

Sainsbury’s had until 5pm today to make a fresh bid for Home Retail after its £1bn offer was rebuffed in November.

The company said previously that it could could shut a raft of Argos stores and relocate them within its supermarkets if the deal was given the go-ahead. Retail experts believe between 150 and 200 Argos stores could be impacted.

The supermarket has already been working in partnership with Home Retail to test a number of Argos concessions in Sainsbury’s stores. It believes the combination of the two companies would create a strong food and non-food retailer with strong heritages.

The companies have agreed a three-week extension on the deadline of the deal to 5pm on 23 February in order to complete the due diligence on the proposed offer.

If approved, the combination of the two companies would trigger synergies of about £120 million in the third full year after the deal is complete, Sainsbury’s said.

It is estimated that about a half of the savings will be found by relocating Argos stores into Sainsbury’s supermarkets as concessions, as well as launching new Argos concessions and expanding Sainsbury’s click and collect service. It also expects to deliver a third of the savings by removing back office functions that overlap between the two companies and by selling Sainsbury’s clothing and homeware products to Argos customers.

The supermarket said that, in order to bring the savings to bear, it will face a one-off costs of about £140m, split equally over three years.