A major investor in Argos-owner Home Retail Group has increased the pressure on bidder Sainsbury’s by saying a deal would need to be worth at least £1.4bn.
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Home Retail’s negotiating position has been helped by a deal to sell Homebase to the Australian firm Wesfarmers, following speculation that Homebase could be sold off if a deal with Sainsbury’s were to go ahead.
Together the offer and capital returns value each Home Retail share at 161.3 pence, based on Sainsbury’s closing share price of 244.6 pence Monday.
Sainsbury’s bid comprises 0.321 new shares and 55 pence in cash for each Home Retail share.
The Times said Qatar’s backing is vital if Sainsbury’s is to win the takeover battle before a deadline of February 2.
The offer implies a value of approximately 1.1 billion pounds for Home Retail’s share capital.
Home Retail Group’s sale of DIY chain Homebase in January was said to pave the way for Sainsbury’s to purchase the retailer, given it had little interest in entering the hardware sector.
The retailer believes the combination of the two companies would create a strong food and non-food retailer with strong heritages.
The acquisition would be Sainsbury’s biggest, giving it more than 800 Argos stores and a vastly expanded product delivery network.
“Given the comprehensive list of justifications provided by Sainsbury and a transaction that looks accretive at virtually any price, we expect Sainsbury to announce a deal prior to the deadline”, it said. The rise of discounters such as Aldi and Lidl have also eaten into supermarket profits.
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The proposed deal would lead to a full break up of Home Retail.
