Sainsbury’s £1bn Home Retail bid due to rise

CITY experts placed their bets on Sainsbury’s upping its offer for Home Retail yesterday as it emerged former Tesco boss Sir Terry Leahy had eyed the Argos owner, writes Laura Chesters.

Analysts at Citigroup raised their price target on Home Retail shares and said there was a 70pc chance Sainsbury’s would increase its offer.

It was also reported that Leahy, with US private equity business Clayton Dubilier & Rice, had looked at Home Retail last year and was keeping the situation under review.

It emerged earlier this week that Sainsbury’s had made a £1bn cash and share offer in November for Home Retail Group, which also owns DIY chain Homebase, that was rejected. It is thought a number of private equity firms have reviewed the option of making a bid for Home Retail but ruled it out on the grounds that returns would not be high enough.

One expert said the deal was ‘Sainsbury’s to lose’.

Sainsbury’s is interested in buying Argos to bolster its position in the online delivery market to compete with US behemoth Amazon which is expanding into groceries in the UK. If Sainsbury’s successfully buys the group it is likely it will shut many Argos stores and sell Homebase.

Sainsbury’s also issued an update on shareholder support for the purchase and said the Qatar Investment Authority, which owns 25pc of the supermarket giant, ‘would consider any such proposal in detail before making a decision on its position.’

Home Retail shares jumped more than 40pc on the news on Tuesday and rose almost 3pc to 136p yesterday. Sainsbury’s shares slipped 0.95pc, or2.3p, to 238.7p.