Sainsbury’s agrees £1.3bn offer for Argos

The boards of Sainsbury’s and Home Retail Group have announced an agreement on terms for a possible offer to buy Argos for £1.3 billion.

The previous offer from Sainsbury’s of £1bn in November last year was rejected by the Home Retail Group.

Any deal would be subject to shareholder approval and should be completed by the first quarter of the year.

If agreed, the deal would see Argos absorbed into concessions within Sainsbury’s supermarkets. This, said Home Retail Group, would create “an enhanced supply and delivery network and a strong presence across food and grocery, clothing, homewares, toys, stationery, electricals, and furniture”.

In a statement, Home Retail Group said: “The possible offer and proposed capital returns together imply a value of approximately 161.3 pence per Home Retail Group share, based on the closing price of Sainsbury’s shares on February 1, and a value of approximately £1.3bn for Home Retail Group’s share capital.”

Sainsbury’s said it would expect a one-off cost of £140 million in the three years following completion if an offer were accepted. This cost would be related to store fit-out expenditure.

Sainsbury’s has until 5pm on February 23 to announce whether it intends to make a firm offer on the UK retail group.

Home Retail Group added: “While the board of Home Retail Group continues to believe in the prospects for the standalone company, it recognises that the possible offer will provide an attractive opportunity for Home Retail Group shareholders to receive a full valuation for their shares, and, through their shareholding in the combined group, also to participate in the value created by the combined group from the transaction.”

On January 14, the Home Retail Group agreed a deal to sell its Homebase brand to Australian retail group Wesfarmers for £340 million, which will be rebranded as Bunnings.