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Multichannel key to Sainsbury’s plans to bid again for Argos

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Sainsbury’s is looking to a multichannel future now that an offer for Argos owner the Home Retail Group seems likely to be accepted.

The supermarket today said it had reached agreement with Home Retail Group on a possible offer worth £1.3bn, more than the £1.1bn value of the Argos owner’s share capital. Home Retail Group said it will recommend the offer, if made, to its shareholders. Sainsbury’s now has until February 23 to make a firm offer for the group.

The move comes just weeks after Sainsbury’s revealed that Home Retail Group had turned down a previous offer, thought to be worth £1bn, from Sainsbury’s.

Sainsbury’s is a Leading retailer in the IRUK Top500 research, while Argos is an Elite trader in the index of the UK’s top 500 ecommerce and multichannel retailers.

Both now agree that the enlarged business would create a new food and non-food retailer whose multichannel capabilities would span digital, store and delivery. The two also envisage combined retail space. “The combined entity,” said both Home Retail Group and Sainsbury’s in their statements to the stock exchange today, “will have attractively located stores across the UK, with an enhanced supply and delivery network.” Other attractions, they suggest, include cost-cutting opportunities such as the chance to relocate some existing Argos stores into Sainsbury’s supermarkets and the growth of click and collect from both, as well as the ability to “deliver profitable sales growth by offering customers the right combination of location, range, speed and flexibility, across a wide range of products.”

Home Retail Group’s sale of Homebase to Australian group Wesfarmers is a condition of the deal.

Sainsbury’s envisages exceptional costs of £140m over three years following completion.

However, both say there is still no certainty an offer will be made.

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