Sainsbury’s makes firm bid for Home Retail Group

Sainsbury’s issued a firm offer for the Home Retail Group (HRG) on Friday (18 March) and, following South Africa-based Steinhoff’s announcement that it was withdrawing its interest, the supermarket chain looks likely to seal the deal for around £1.4bn. HRG includes the Argos DIY chain whose home delivery infrastructure is a key selling point for Sainsbury’s.

In an official statement issued on Friday regarding the firm offer, Sainsbury’s set out the reasons why its board wants to buy HRG. Among other things, the Sainsbury’s board believes that the offer will:

·        Optimise the use of Sainsbury’s and HRG’s combined retail space. The Combined Group will have  stores across the UK and Ireland, with an enhanced supply and delivery network;

·        Create the ability to relocate existing Argos stores into Sainsbury’s supermarkets, which will “reduce fixed operating and store labour costs when compared to standalone Argos stores”;

·        Create the ability to expand the Argos store network by opening new infill Argos stores within Sainsbury’s supermarkets in catchments that are not currently served by Argos;

·        Create cross selling opportunities between the two businesses through the relocations and infills and from the opportunity to offer Argos Click and Collect services across the Sainsbury’s store network;

·        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 grocery, clothing, homewares, toys, stationery, electrical goods, furniture and other general merchandise”.

The HRG board responded by acknowledging the firm offer from Sainsbury’s and adding that it “will issue a further statement in due course”.