OK, this is big news. That’s B.I.G. Sainsbury’s is just about there with its plan to buy Home Retail Group (HRG) – or Argos as we should now call it since HRG has already reached a deal to sell the Homebase chain to Wesfarmers.
The “possible” deal doesn’t quite hit the £1.4bn HRG wanted but at around £1.3bn when you take all the share prices into account, it’s pretty close (what’s £100m between friends, after all?)
So, what does it mean for UK retail? The combination of two of its biggest names into an omnichannel giant. But they’re two names that have been struggling. Sainsbury’s may be a better performer than some in UK grocery but it’s still facing the onslaught of low-cost rivals and the entry of Amazon into grocery deliveries.
Meanwhile Argos has been reinventing itself as a digital-retailer-with-stores but has also been suffering from other online competition and The Amazon Factor.
What the (possible) combined group will do is close lots of those Argos stores and open up Argos spaces inside Sainsbury’s locations. The two have already done that in a limited way and Sainsbury’s must be pleased with the results because it’s been pretty clear it was panting to buy Argos since it made its first, rebuffed, offer last November.
It seems Sainsbury’s investors took a bit of convincing, as did the HRG board. Are analysts convinced? Yes and no. Some think it’s madness to combine two retailers with problem markets. Others think its an inspired move. Of course we won’t know who wa right until it happens (if it happens – don’t forget, the deal is still only “possible”!)