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Merger of blue chip retailers

Sainsbury’s and Argos on track for £1.3bn tie-up

Sainsbury's bagSainsbury’s has reached agreement on the terms of a  £1.3 billion offer for Argos-owner Home Retail Group.

The supermarket group believes a tie-up with Argos will enable it to take on rivals such as Amazon by making use of multi-channel sales platforms and the use of their combined space.

It also represents a huge shift for Sainsbury’s into the non-food sector.

Under the proposed deal Home Retail Group shareholders will receive  0.321 new Sainsbury’s shares and 55p in cash for every share they own.

They will also receive 2.8p in lieu of a final dividend in respect of the financial year ending 27 February 2016.

The value of the deal is based on the closing price of Sainsbury’s shares last night and represents a premium of approximately 63% to the closing price of Home Retail Group shares on 4 January, the last business day prior to the start of the offer period.

The board of Home Retail Group has indicated to Sainsbury’s that it is willing to recommend the takeover to its shareholders. 

In a statement, Sainsbury’s said: “The combination of Sainsbury’s and Home Retail Group is an attractive proposition for the customers and shareholders of both companies, establishing a platform for long-term value creation.

“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, multi-channel proposition.

“Specifically, the combination of Home Retail Group and Sainsbury’s will:

·      Create a food and non-food retailer of choice for customers, building on the strong heritages of both businesses whose brands are renowned for trust, quality, value and customer service;

·      Deliver profitable sales growth by offering customers the right combination of location, range, speed and flexibility, across a wide range of products;

·      Bring together multi-channel capabilities including digital, store and delivery networks to provide fast, flexible and reliable product fulfilment to store or to home across a wide range of food and non-food products;

·      Optimise the use of their combined retail space. The combined entity will 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;

·      Create a financial services proposition that will provide a wider range of customer-centric services including credit cards, loans, deposits, insurance and ATMs; and

·      Deliver significant revenue and cost synergy potential, as outlined further below. 

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