Sainsbury’s is to press ahead with its takeover of Argos parent Home Retail Group after the two companies reached agreement on the terms of the £1.4 billion deal.
The takeover is now expected to be completed in the third quarter of 2016. HRG shareholders will receive 0.321 new Sainsbury’s shares plus 55p in cash for each share they currently hold. In addition, they will received 25p per HRG share following the sale of Homebase, and 2.8p per share as a final dividend from HRG.
David Tyler, chairman of Sainsbury’s, said: “We are very pleased the board of Home Retail Group plc has recommended our offer for the acquisition of its business to its shareholders. The combined business will offer a multi-product, multi-channel proposition, with fast delivery networks, which we believe will be very attractive to customers and which will create value to both sets of shareholders.”
Argos concession in Sainsbury’s supermarket.
The deal creates the opportunity for Sainsbury’s to drive growth in clothing and general merchandise. And, setting out the rationale for the deal it said: “Sainsbury’s sees strong growth potential in the long term from being able to provide a full multi-channel proposition, offering Click and Collect and “fast to home” delivery.
Sainsbury’s has trialling a number of Argos concessions in Sainsbury’s stores. Argos launched ten concessions in Sainsbury’s supermarkets which have now been trading for an average of 38 weeks. In addition Sainsbury’s has also offered Argos FastTrack Collection services in one small supermarket and two convenience stores since November 2015.
Sainsbury’s said customer research had shown that both Argos and Sainsbury’s customers valued having Argos concessions in Sainsbury’s stores as they could complete more general merchandise shopping missions at the same time as they do their food and grocery shop.
Relocations of Argos sites into Sainsbury’s stores is expected to make up 55 per cent of the Argos concessions in Sainsbury’s stores. More than half of Argos store leases expire with five years.
Argos collection services will be offered in Sainsbury’s stores which will drive additional footfall and cross selling opportunities.
Sainsbury’s expects EBITDA synergies of at least £160 million in the third full year after completion of the deal.
Sainsbury’s expects EBITDA synergies of at least £160 million in the third full year after completion of the deal.
Sainsbury’s currently operates 1,374 stores including 601 supermarkets and 773 convenience stores. It reported sales of £23.8 billion for the year to 14th March 2015.
Argos reported sales of £4.1 billion in the year to 27th February. It operates 845 stores and multiple distribution centres.
John Coombe, chairman of Home Retail Group said: “We are pleased that Sainsbury’s has recognised our progress and our potential with its recommended acquisition of Home Retail Group plc. This is a testament to the vision and hard work of management and all our colleagues. We thank them for all they have done for Home Retail Group plc and Argos in particular and wish them well for the future.”