Sainsburys bid £1.4bn for Home Retail Group

After South African Steinhoff International pulled out of the running earlier today, Sainsburys has bid £1.4bn for the Home Retail Group, valuing the company at 172.3p per share.

In a statement, Sainsbury’s chairman David Tyler said: “The UK grocery retail industry is undergoing a period of intense change in customer shopping behaviour and in the competitive environment.

“This combination with HRG presents an opportunity to accelerate our strategy, delivering compelling revenue and cost synergies.

“We will create a multi-product, multi-channel proposition with fast delivery networks that we believe will be very attractive to the customers of both businesses.”

Sainsburys has been coveting Argos and its well developed Fast Track home delivery network that was launched last year. Though the company had a major wobble during the Black Friday fire sale, its infrastructure reaches most of the UK through 800 stores nationwide.

It is expected that many of the jobs at Argos will be kept, though where they are close to a Sainsburys they will be brought into the grocery store and the operations run from a single building.

With the South African company announcing that it was no longer bidding, the cost should not increase much beyond the £1.4bn offered by Sainsburys though this is very much down to the acceptance from the shareholders of Home Retail Group.

If the deal goes ahead, Sainsburys will be able to go head to head with Amazon, offering many of the SKUs the online giant does at present, though strictly in the UK. This move comes during a period of stagnation in the grocery market which seems to be at capacity. For businesses that wish to grow in the sector, they must move into other markets to succeed.

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