The battle for Argos takes hostile twist
SAINSBURY’S battle to snap up Argos took a dramatic turn last night after an Australian supermarket giant swooped on its sister company Homebase.
In a topsy-turvy day for investors, Sainsbury’s said it could go hostile in its bid for Home Retail Group in order to get its hands on Argos.
But at the same time, Home Retail Group revealed it is in advanced talks to sell off DIY chain Homebase to Wesfarmers, one of Australia’s biggest retail names.
If Homebase is sold it could make Sainsbury’s approach for Home Retail Group simpler. It only wanted Argos and would have had to sell Homebase. Home Retail Group said the deal, which could be agreed by this morning, could be worth as much as £340m, with £200m returned to shareholders.
The approach by Wesfarmers was a late twist in a day which had seen Sainsbury’s chief executive Mike Coupe make a case for the £1bn attempt to woo the owner of Argos and Homebase.
Coupe claimed merging with Home Retail Group would make the combined business bigger than internet giant Amazon and added that bringing the two companies together would create a business selling around 100,000 clothing, electronics and toy products.
He said: ‘It would be one of the biggest non-food retailers in the UK, bigger than John Lewis, bigger than Amazon, and bigger than M&S if you take their clothing and general merchandise [ homewares] business.
‘This would create a business that had a unique capability in terms of how products are delivered, whether that’s through bricks and mortar, on shelves, through collection or through home delivery.’
But although Coupe said he wanted to do a ‘friendly’ deal, he added he could not rule out a hostile bid.
It was revealed last week that Sainsbury’s had made an approach to Home Retail Group in November. It was rejected as having undervalued Home Retail.
The combined firms would generate £6bn of non-food sales. This would leapfrog archrival Amazon who recorded annual sales of £5.3bn last year.
Sainsbury’s, and the other three grocers which makes up the Big Four, have suffered fierce competi- tion from online rivals such as Amazon and discounters Aldi and Lidl.
The acquisition is aimed at preparing Sainsbury’s for the future and shoppers would be able to buy their food, electronics and toys all under one roof.
Argos has 840 shops in the UK and, with its fleet of trucks and state-ofthe art technology, is able to deliver items within hours of taking an order. Sainsbury’s thinks speed of delivery will become increasingly important as Amazon launches one- hour deliveries. Shares in Sainsbury’s fell 1.39pc or 3.5p to 247.7p despite Britain’s third-largest grocer posting better-than-expected festive trading figures. Sales for the 15 weeks to January 9 fell 0.4pc, less than the 0.7pc fall analysts had forecast.
It has been the strongest performer among the Big Four but still saw eight straight quarters of declining sales.
Over Christmas, Sainsbury’s sold more than 17,000 Golden Bow Rich Fruit Cakes and over 550,000 Cognac Laced Christmas Puddings.
As the Sainsbury’s deal rumbles on, Home Retail Group said it was in talks with Wesfarmers to sell Homebase for £350m. Wesfarmers owns the Coles grocery store, seen as Australia’s answer to Sainsbury’s.
Britain’s biggest retailer, Tesco, is giving its Christmas update today. Analysts at broker Exane BNP Paribas expect the firm to post sales down by 2.5pc over its six-week festive period compared with a year ago.