Home Retail Group Plc said its board will unanimously recommend J Sainsbury Plc’s £1.4 billion ($2 billion) bid after South African retailer Steinhoff International Holdings NV withdrew from the battle to acquire the Argos owner.
The announcement effectively ends a protracted takeover saga that began on January 5 when Sainsbury first disclosed its interest. After weeks of wrangling over price, Home Retail accepted a cash-and-stock bid, only for Steinhoff to enter the fray with a higher offer that it later withdrew to focus on acquiring electronics retailer Darty Plc.
The takeover will bring an end to almost 10 years of independence for Home Retail, which separated from credit-checking company Experian Plc in 2006. Since then, Home Retail’s market capitalization has fallen from £3.6 billion to £1.3 billion, while Experian’s value has risen to almost 12 billion pounds from £5.7 billion.
"For Home Retail investors, the deal offers a welcome recovery in the value of their investment," Steve Clayton, head of equity research at Hargreaves Lansdown, said by e-mail. As recently as December, Home Retail was worth as little as £730 million.
Sainsbury’s cash and shares offer represents a premium of about 74 percent to the company’s closing price on January 4, the day before Sainsbury’s approach became public.
Buying Argos will give Sainsbury 734 general-merchandise stores and a nationwide distribution network, which the grocer hopes will bolster its e-commerce operation and shore up its defenses against Amazon.com Inc. The grocer estimated that buying Argos, which sells everything from jewelry to televisions, will add at least 160 million pounds to profit by the third year after completion.
Sainsbury shares fell 1.3 per cent to 272.8 pence at 8:35 am in London. Home Retail was down 0.7 per cent at 164.7 pence.
The companies expect the transaction to be completed in the third quarter.
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