Supermarket chain Sainsbury’s has offered £1.3bn to win control of Argos owner Home Retail Group.
The Boards of J Sainsbury and Home Retail Group have announced that they have reached agreement on the key financial terms of a possible offer for Home Retail Group by Sainsbury’s.
After being rejected last year, Sainbury’s has now offered the equivalent of 161.3p a share for the retailer.
The offer represents a 63% premium to Home Retail’s share price on January 4.
Under the terms of the possible offer Home Retail shareholders would receive 0.321 new Sainsbury’s shares and 55 pence in cash for each share.
To reflect the proceeds of the Homebase sale, investors would also get about 25 pence per share and payment of 2.8 pence in lieu of a final dividend.
The chain’s shareholders would own about 12% of the combined group if a deal progresses.
Sainsbury’s expects to make savings by moving Argos stores into supermarkets as leases expire, as well as removing “duplication and overlap” and selling its own clothing and homeware ranges through Argos. However, it said making these changes would cost the company £140m in the first three years.
Sainsbury’s now has three weeks under takeover rules to carry out due diligence on the Argos owner. Thus, it must make a firm offer by 17:00 on February 23 or walk away.