Potential Sainsbury’s to buy Argos deal has prompted a mixed reaction

After an attempt by Sainsbury’s to buy Home Retail in November was rebuffed, it was announced last week that the grocer has until 2 February to make a firm offer for the company, or not attempt a takeover for a further six months (1).

There has been a negative reaction to Sainsbury’s, as shares fell by 5.2% the day the approach was revealed; they have continued to reacted negatively again today. Mike Coupe, Sainsbury’s Chief Executive, said the combined entities would have a non-food business the same size as John Lewis or Amazon, with 100,000 products (1).

However, shares in Home Retail rocketed yesterday by 41.1% after news that Britain’s second biggest grocer made an offer that was rebuffed in November (3). Shares have continued to rise again today following the news.

The published strategic plan comes after Sainsbury’s reported they had traded well in a “highly competitive market” over Christmas (2).

Reports suggest that the grocer had initially offered around £1.1bn for Home Retail Group, however Home Retail shareholders are hoping for an improved offer of around £1.6bn, or 200p per share (2).

The offer was rejected as Home Retail believed it had “undervalued Home Retail Group and its long-term prospects.” Should the Sainsbury’s takeover go ahead, it could lead to Home Retails two assets, Homebase and Argos, being split up, given the supermarket’s greater interest in Argos (3).


(1) The Financial Times. “Sainsbury’s sets out case for Argos bud amid strong Christmas”.

(2) The BBC. “ Sainsbury’s Christmas sales fall”.

(3) The Telegraph. “Sainsbury’s bid could spell break up of Home Retail”.