Sainsbury’s bid for Argos boosted by DIY sell-off


In a move that could pave the way for Sainsbury’s to take over Argos, Home Retail Group confirmed that it was in advanced talks to sell Homebase to the Perth-based Wesfarmers, reports The Times.

Market sources believe that a sale of Homebase will bolster Sainsbury’s attempt to win support for a potential takeover of Argos.

Sainsbury’s stunned the market last week when it revealed that it had made a takeover approach at a rumoured £1 billion for Home Retail in November, but had been rebuffed.

It has set its sights on Argos as it wants to create a company with the scale to rival John Lewis or Amazon. In a 22-page report published yesterday, Sainsbury’s reiterated its reasons for wanting a tie-up with Argos, alongside a trading statement revealing that it had recorded better-than-expected like-for-like sales over Christmas.

Mike Coupe, the chief executive, said: “This is a compelling strategic opportunity for us at a time that customers’ shopping habits are changing very rapidly. The combined businesses would have a huge range of products, about 100,000 in total, and it would have the scale of a business like John Lewis and Amazon.”

However, Mr Coupe refused to be drawn on any possible plans for the DIY chain if a takeover of Home Retail were to happen.

This led to speculation that Home Retail was holding separate talks with another bidder for Homebase, which was confirmed yesterday afternoon. John Walden, the chief executive of Home Retail, said that selling Homebase to Wesfarmers would “represent good value for shareholders and a growth opportunity for the Homebase”.

If Wesfarmers manages to buy Homebase, it will mark the Australian company’s entry into the British retail sector.

Mr Walden said: “The sale [of Homebase] would allow the group to focus on Argos and its transformation plan, with an improved balance sheet and financial position, which I believe represents an even greater opportunity for building long-term shareholder value.”

Home Retail will report its festive trading figures today, with much of the focus on the performance of Argos, where like-for-like sales have fallen recently. It is believed that Mr Walden and Home Retail’s investors could be willing to sell Argos, but any negotiations will hinge on the price Sainsbury’s is prepared to pay.

Sainsbury’s also will need to gain the support of its shareholders, including the Qatar Investment Authority, which owns just over 25 per cent of the group.

Mr Coupe said that Sainsbury’s did not need to do a deal and that there was a limit to what it would be prepared to pay. He said that Sainsbury’s and Argos had universal appeal and similar shoppers. Together, they could become a giant with a combined property and digital portfolio that would enable consumers to shop online, on their mobiles and at about 2,000 locations.

Sainsbury has until February 2 to make a firm offer. Its shares fell 3½p to 247¾p yesterday. Home Retail rose 7½p to 149½p.