Supermarket keen on Home Retail

Sainsbury’s reveals move on Argos and Homebase

Sainsbury'sSainsbury’s said it made an approach in November to Home Retail Group— the owner of the Argos and Homebase chains — regarding a possible offer for the group

The supermarket chain said it is considering its position after being rejected. It has until 2 February to make a formal offer.

Home Retail, faced with the migration of shoppers to internet-based retailers and discounters, has seen its revenues stagnate, while Sainsbury’s is looking for new avenues for growth and investors on both sides may therefoere see some upside from a tie-up.

The big four supermarket players are struggling to fend off the challenge from Aldi and Lidl and Sainsbury’s has already made a move to arrest their expansion by relaunching Netto.

However, this may not be enough to rein in the big two discounters and it is looking at other ways of growing its business. The move on Home Retail would represent a further step away from grocery retailing.

Schroders, which is the biggest shareholder in Sainsbury’s with an 18.6% stake, and Toscafund with 5.08% were said to be unhappy at not being informed of the approach.

Analysts supporting a tie-up believe a merger with Argos would enable Sainsbury’s and Home Retail to improve their online offering and tackle the problem of location.

Argos stores are still based in high streets, making them less attractive to those shopping for bulky goods that require car parking. There is potential to make use of Sainsbury’s out of town stores, and also opportunities for huge cost savings.

Home Retail Group shares closed up 41%. Sainsbury’s fell 5%.


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