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Sainsbury's eyes Home Retail Group to bolster multichannel

Sainsbury's is considering making a second bid to acquire Home Retail Group. The grocer announced today, 5 January, that it made a bid for the owner of Argos and Homebase in November, but the offer was rejected. Sainsbury's now has until 2 February to make another formal offer, if it chooses to do so.

Over the last year, the two retailers have been working together to trial Argos concessions in a number of Sainsbury's stores.

Sainsbury's said: "The Board of Sainsbury's believes the combination of Sainsbury's and Home Retail Group is an attractive proposition for the customers and shareholders of both companies, establishing a platform for long-term value creation. The combination is an opportunity to bring together two of the UK's leading retail businesses, with complementary product offers, focused on delivering quality products and services at fair prices, through an integrated, multichannel proposition."

The grocer believes an acquisition of Home Retail Group would bring together the multichannel capabilities of both retailers, as well as strong delivery networks, for "fast, flexible and reliable delivery to store or to home across a wide range of food and non-food products".

The grocer said it would continue to operate its Argos concessions while also selling Sainsbury's products and services through the Argos network.

Argos has continued to bolster its delivery proposition in recent months by offering a Fast Track same-day delivery service in time for Christmas. But the retailer suffered from a number of eCommerce outages in the run up to Black Friday which left frustrated customers faced with 'crowd control' messages.

As well as the benefits of teaming up multichannel strategies, Sainsbury's would also benefit from a diversified product range, as the grocers continue to battle it out in the price wars to attract customers. 

Darryl Adie, managing director of Ampersand, said: "Acquiring Home Retail Group would have been a major coup for Sainsbury’s. The current struggles of the major supermarkets are well documented, especially as value chains such as Aldi and Lidl go from strength to strength. Sainsbury’s, which previously owned but sold Homebase back in 2000, must be kicking itself that the deal didn’t go through, with its shares falling by 5% after the announcement was made.

"Taking Argos, with its robust multichannel offering, under its wing would have certainly boosted Sainsbury’s proposition. Argos’ same day delivery offering attracted a lot of attention over the Christmas period and Sainsbury’s would benefit greatly by having insight into the inner-workings of Argos’ model.

"Looking ahead, threats such as the impending launch of Amazon Fresh in the UK will provide further cause for concern amongst the major supermarkets. It will be interesting to see if Sainsbury’s competitors react to this news of a failed takeover by mounting their own acquisition attempts."