The battle for Argos owner Home Retail Group (HRG) has finally come to an end with Sainsbury's emerging victorious. While South African retail group Steinhoff decided not go ahead with a rival bid for HRG, the UK supermarket chain confirmed its bid with a £1.4bn (€1.8bn, $2.03bn) offer, just minutes before the Friday (18 March) deadline set by the Takeover Panel.
Mike Coupe, chief executive at Sainsbury's, said: "The combination of Home Retail and Sainsbury's is a powerful one that will create long term shareholder value for both companies." With regards to the risk element involved, Coupe said the merger was not risky and in fact it was "well within the executional capabilities" of its management team.
Steinhoff, which ditched its Argos plans just hours before the deadline, is understood to have instead agreed to acquire French electronics retailer Darty for £673m. With regards to HRG, Markus Jooste, chief executive at Steinhoff, said while it was a "compelling business with unique attributes that remains attractive on many fronts", it decided not to go ahead after the findings from its due diligence review and ancillary discussions made it to believe that it was "against our investment criteria".
The bid from Sainsbury's, however, is expected to disappoint the shareholders of HRG, as they were hoping to get a higher bid, especially after HRG recently revealed that it had £100m extra in annual cash reserves. While HRG in response to the bid said it "looks forward to working with Sainsbury's towards making a recommendation of the offer", Coupe said this was "as warm as you could get", indicating this would be Sainsbury's highest offer.
Sainsbury's said its attempts to gain market share into the fast growing online market would get a boost with this acquisition. It added both the companies combined would create "a leading food and non-food retailer of choice for customers, building on the strong heritage of both the Sainsbury's and HRG businesses whose brands are renowned for trust, quality, value and customer service".