Sainsbury’s wins Argos: Is there a sting in the tail?

argosSo Sainsbury’s is the winner in the race to buy Argos, although whether it will end up a winner is open to question.

Last year it offered around £1bn for Home Retail Group, which included both Argos and Homebase, but was rebuffed. Homebase was then bought by Wesfarmers for £340m (a sum that would have made the Sainsbury’s £1bn offer seem like even more of a bargain).

Sainsbury’s came back with a £1.3bn cash-and-shares possible bid but Steinhof then said it would offer more. As Friday’s bid deadline loomed, Steinhof decided it wasn’t interested after all and although Sainsbury’s hasn’t had to increase its offer, as Home Retail’s shares have risen, that offer is now worth £1.4bn.

In fact, Home Retail’s shares are now at a 75% premium to their price in January before Sainsbury’s interest was made public. So Sainsbury’s has ‘won’ Argos for a whole lot more than it wanted to shell out.

Observers are still divided as to whether this can really be viewed as a win. Many think that combining two struggling businesses doesn’t make sense, while others can see the advantages, which include considerable cost savings for both business as the chance to maximise the use of space inside sprawling Sainsbury;s stores.

High street landlords certainly won’t fell like winners though as analysts think around 150 to 330 of the chain’s 734 stores could be replaced by a smaller number of concessions inside Sainsbury’s branches, plus hundreds of small click-and-collect kiosks.

Will it all work out in the end? Hard to tell but one thing is sure, this story will run and run.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s