Sainsbury’s is BACK with a £1.3 billion takeover bid for Argos

Sainsbury’s has agreed financial terms for a £1.3bn takeover with Argos owner Home Retail Group.

The deal, which is worth £340m, will see £200m returned to shareholders and would also lighten its debts, with £1.4bn of lease liabilities from Homebase stores transferred off Home Retail’s books.

Under the terms of the offer Home Retail shareholders will receive 0.321 new Sainsbury’s shares and 55 pence in cash for each of their shares.

Qatari Investment Authority, Sainsbury’s biggest investor, has suggested that it might back the grocer were it to make a renewed offer of over £1bn for Argos.

Sainsbury’s shares surged by 8.4p to 245.1p, pleasing investors who are against the deal, while Home Retail dropped 5.8p to 136.7p.

Sainsbury made an initial approach in November that was rejected, and negotiations had stalled in late January over the price, four people familiar with the matter previously told Bloomberg News.

Talks nearly ground to a halt last month, with Home Retail’s board said to be holding out for roughly 170p a share – well above the 150p price Sainsbury’s was hoping to pitch.

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.

It has said that about a quarter of its stores have some under-utilized space, which it intends to fill with clothing, other non-food items and in-store concessions. “As long-term observers of Home Retail, we remain less convinced of the strategic logic and rationale of such a deal”.