Sainsbury’s approach to Argos owner Home Retail Group rejected

Sainsbury wants to buy the owner of Argos.

Sainsbury wants to buy the owner of Argos. - Credit: PA

Supermarket Sainsbury’s has confirmed it made an approach for Argos owner Home Retail Group, which has been rejected.

Sainsbury’s said it is considering its position, adding that there can be no certainty that it will make a formal offer for the business, which also owns DIY chain Homebase.

But it said: “The board of Sainsbury’s believes the combination of Sainsbury’s and Home Retail Group is an attractive proposition for the customers and shareholders of both companies, establishing a platform for long-term value creation.”

Sainsbury’s did not disclose the details of its approach, but Home Retail Group has a stock market valuation of just over £1 billion.

The supermarket said it first made its approach for Home Retail Group in November.

It added that over the last year it has worked in partnership with Home Retail Group testing a number of Argos concessions in Sainsbury’s stores.

Sainsbury’s said a combination of the two stores will create a strong food and non-food retailer with strong heritages.

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It added that the benefits of a tie-up would include profitable sales growth, create a wider financial services business and would generate savings by cross-selling each firm’s products and services across the wider group’s stores.

Shares in Home Retail jumped 34%, while Sainsbury’s stock slipped more than 3%.

The move comes as the supermarket sector remains locked in a price war, which has seen majors such as Sainsbury’s and Tesco battle to maintain market share against discounters Aldi and Lidl.

The grocery sector has seen prices fall for more than a year.

The industry will see the approach by Sainsbury’s chief executive Mike Coupe, who took over from previous successful boss Justin King in July 2014, as a bold move in a sector that is struggling to regain its equilibrium.