Sainsbury’s moving closer to Home Retail Group deal
The Boards of Sainsbury’s and Home Retail Group announced this morning that they have reached agreement on the “key financial terms of a possible offer for Home Retail Group by Sainsbury’s”. According to a statement issued this morning by Sainsbury’s: “The Possible Offer implies a value of approximately £1.1bn for Home Retail Group’s share capital, based on the closing price of Sainsbury’s shares on 1 February 2016. The Possible Offer and Proposed Capital Returns together imply a value of approximately 161.3 pence per Home Retail Group share, based on the closing price of Sainsbury’s shares on 1 February 2016, and a value of approximately £1.3bn for Home Retail Group’s share capital.”
Outlining the “rationale” for linking up with Home Retail Group’s Argos chain, the Sainsbury’s statement said it would “bring together two of the UK’s leading retail businesses, with complementary product offers”.
The supermarket also gave some more specific perceived benefits for shareholders and customers. These included “bringing 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”.
The statement did caution that “the Possible Offer does not impose any obligation on Sainsbury’s to make an offer, nor does it evidence a firm intention to make an offer”, adding: “There can be no certainty that Sainsbury’s will proceed to make a Firm Offer for Home Retail Group. A further announcement will be made in due course.”
However, most industry observers seem to be believe that Sainsbury’s is definitely keen to finalise this deal.
The Sainsbury’s statement also point out that “completion of the Homebase Sale is expected to be a condition to a Possible Offer by Sainsbury’s”. As previously reported, Wesfarmers has agreed to buy Homebase from the Home Retail Group for £340m, but this is still subject to shareholder approval.
