Sainsbury’s has made a £1bn move to buy Home Retail Group, the owner of Argos and Homebase.
The supermarket group said it had made an approach to Home Retail in November, but that its proposal had been rejected.
Sainsbury’s, which has Argos outlets in a handful of its stores, said it was now considering its position.
Shares in Home Retail Group soared nearly 30% to 128.05p after the announcement, valuing the group at just over £1bn. But shares in Sainsbury’s fell by almost 5%, to 242p.
Sainsbury’s said its board believed a combination of the two groups “is an attractive proposition for the customers and shareholders of both companies, establishing a platform for long-term value creation”.
It added: “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.”
Sainsbury’s owned Homebase until 2000, when it sold the DIY chain to GUS, a former incarnation of Home Retail Group, for £969m.
It said a tie up would “create a food and non-food retailer of choice”, with a strong presence in food, grocery, clothing, homewares, toys, stationery, electricals, furniture and other general merchandise.
The two businesses would also be able to save costs by combining stores and operations, according to Sainsbury’s. The supermarket group said it could sell its products via Argos’s network as well as install more Argos outlets in its supermarkets.
Argos operates around 10 outlets in Sainsbury’s stores, after the two companies agreed to work together a year ago. The supermarket group brought in Argos as a way to take up under-utilised space alongside other retail partners including Timpson shoe repair and Jessops, the camera shop.
This article was written by Sarah Butler, for theguardian.com on Tuesday 5th January 2016 13.00 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010