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What Sainsbury’s sees in Argos and the Home Retail Group

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Just what does Sainsbury’s see in Argos [RDX RARG] that led it to make an offer, reported to be worth £1bn, for parent company Home Retail Group? Multichannel expertise, it seems, is key to the attraction.

The two have already worked together with the launch of Argos digital format stores in branches of Sainsbury’s during 2015, while the supermarket used to own Argos sister company Homebase . Today it emerged that the supermarket is very keen to take things a step further.

At lunchtime Sainsbury’s revealed it made a £1bn bid for Argos owner the Home Retail Group in November. The overture was rejected but in its announcement today Sainsbury’s set out just why it had made the offer – and why the union could yet come about.

In its announcement, it says the combination of the two represents “an opportunity to bring together two of the UK’s leading retail businesses, with complementary product offers, focused on delivering quality products and services at fair prices, through an integrated multichannel proposition.”

Going into more detail, it points to a potential union of multichannel capabilities, including the kind of retail logistics network that enabled Argos to launch same day Fast Track delivery ahead of Christmas. It also sees further opportunities for combined retail space in a move that it says would “create a food and non-food retailer of choice for customers, building on the strong heritages of both businesses whose brands are renowned for trust, quality, value and customer service.”

Despite the initial rebuff, Sainsbury’s said today that it was now “considering its position,” adding, “There can be no certainty that this will result in a formal offer, nor as to the terms of any such offer.”

Commenting on the news, Darryl Adie, managing director of digital agency Ampersand said the deal would have been a “major coup” for Sainsbury’s.

“Taking Argos, with its robust multichannel offering, under its wing would have certainly boosted Sainsbury’s proposition,” he said. “Argos’ same day delivery offering attracted a lot of attention over the Christmas period and Sainsbury’s would benefit greatly by having insight into the inner-workings of Argos’ model.

“Looking ahead, threats such as the impending launch of Amazon Fresh in the UK will provide further cause for concern amongst the major supermarkets. It will be interesting to see if Sainsbury’s competitors react to this news of a failed takeover by mounting their own acquisition attempts.”

Peter Veash, chief executive at The BIO Agency said: “It makes sense for Sainsbury’s to consider growing their business as the grocery market has become squeezed by the discounters such as Lidl and Aldi. On top of that, grocery shoppers are changing their shopping behaviour by moving online.

“Argos is at the forefront of digital and has the right digital assets and delivery infrastructure to meet customer demand. Consumers are more and more switched on and increasingly expect deliveries in hours. Businesses that can deliver a seamless experience and meet consumers’ advanced needs will definitely thrive. Sainsbury’s is no doubt looking to fill a gap and if they succeed in their bid for the Home Retail Group, other grocery giants need to watch out.”

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