A deal to bring together two of Britain’s best known retailers, Sainsbury’s, and the Home Retail Group, could still be in the offing, despite an earlier approach from Sainsbury’s being rejected.
On January 5th Sainsbury’s announced that it had approached Home Retail group, which owns Argos and Homebase, about a possible takeover. The approach, which the Guardian reported could be worth £1.1 billion ($1.6 billion), was quickly rejected by Home Retail, although shares in the company did soar after the news was announced.
Since then, there’s been no more news about any potential deal, but hidden within a pretty upbeat trading statement released by Sainsbury’s on Wednesday morning was a link to a presentation for investors which strongly signals that Sainsbury’s might be getting ready to take another shot at buying Argos and Homebase.
The 22-slide presentation, titled “Accelerating our strategy for growth” doesn’t say that Sainsbury’s is definitely going to make another offer, but all the pieces are there to suggest that it’s a pretty likely outcome.
According to the slides, buying up Home Retail group would allow Sainsbury’s to “accelerate” the company’s strategy. Sainsbury’s is currently trying to expand its non-food offering, and give customers more opportunity to buy stuff like TVs and other electronic goods in its store.
Sainsbury’s presentation then goes on to argue that “combining the businesses would be strategically compelling and would create shareholder value” before outlining in detail over the course of multiple slides, just why bringing together the two companies would make such a good deal.
The presentation is full of corporate jargon, but Sainsbury’s argument essentially boils down to its belief that combining an incredibly successful food business, with two massive home retailers — and providing customers with a one-stop shop for everything they need — is a perfect way for both companies, and their shareholders, to make loads of money.
Sainsbury’s has already been trialling miniature Argos concessions in numerous stores for the past year, so the two businesses do have some overlap right now, but a merger would bring them into even closer alignment.
It’s not just Sainsbury’s board who think that a deal to bring them together with Home Retail is a great idea. On Saturday, Reuters reported that numerous retail analysts think that if the right price can be agreed, then the deal makes perfect sense.
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