Argos owner Home Retail agrees to Sainsbury’s £1.4bn takeover offer

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Sainsbury’s has said the board of Home Retail, which owns Argos, agreed to its £1.4 billion takeover offer on Friday.

The UK’s second biggest supermarket was left a clear run to buy Argos, which sells electricals, jewellery and other general goods, when rival suitor South Africa's Steinhoff International withdrew last month.

Home Retail shareholders will receive 0.321 new Sainsbury's shares and 55 pence in cash for each share, plus an additional cash payment of 27.8 pence from the earlier disposal of the group's other chain, Homebase, and in lieu of a final dividend, Sainsbury’s said.

The deal should be completed in the third quarter of the year and might lead to the closure of up to 200 Argos stores with some relocated in Sainsbury’s supermarkets, according to previous reports.

Shares in Home Retail Group fell 1.1 per cent to 164p in early trading, while Sainsbury's fell 1.3 per cent to 272.7p.

The decision ends nearly five months of talks between the retailers after Sainsbury’s revealed in January it had approached Home Retail with an offer of shares and cash in November but that this was rejected.

Sainsbury's has been trialling Argos concessions in its stores since January. It said that the combination of Sainsbury's and Argos is good for customers and shareholders in both companies.

“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 said in January.

Steve Clayton, head of equity research at Hargreaves Lansdown, said: “This deal catapults Sainsbury's exposure to non-food items forward by around £4 billion a year, and offers tantalising synergies from integrating the Argos estate and delivery capabilities with Sainsbury's own.

“For Home Retail investors, the deal offers a welcome recovery in the value of their investment, following many years of difficult trading.”

Additional reporting by Reuters