Sainsbury's Confirms Offer for Home Retail

LONDON—U.K. grocer J Sainsbury PLC confirmed a £ 1.4 billion ($2 billion) offer for Argos owner Home Retail Group PLC, after South African retailer Steinhoff International Holdings NV pulled out of the race for the company.

The Sainsbury offer is worth 173.2 pence a share, comprising 0.321 Sainsbury's shares, 55 pence in cash and a special dividend.

Sainsbury and Home Retail had previously agreed the terms of the deal, but South African retailer Steinhoff International Holdings NV came in with an offer worth 175 pence a share.

But Steinhoff Friday pulled out of the race, saying it has no plans to make on offer for Home Retail.

Sainsbury's confirmation of its offer came less than half an hour before a deadline set by the U.K. Takeover Panel for it and Steinhoff to make their intentions known.

Sainsbury's said it hasn't yet received Home Retail's recommendation for the offer. Home Retail said following Sainsbury's announcement that "Sainsbury's has stated its wish to obtain the recommendation of the Board of Home Retail Group for its offer, and the Board of Home Retail Group looks forward to working with Sainsbury's towards such recommendation." It didn't specifically say whether it would recommend the offer.

Sainsbury also said that it now believes its acquisition of Home Retail will result in savings of £ 160 million, up from a previous estimate of £ 120 million.

Home Retail is now focused on its catalog-based retailer Argos, which sells furniture, electronics and many other items. It completed the sale of furniture and home products retailer Homebase to Australian diversified retailer Wesfarmers Ltd. for £ 340 million on Feb. 27. It plans to return £ 200 million of the money to shareholders.

Earlier this week, Sainsbury reported a 0.1% rise in like-for-like fourth-quarter retail sales, excluding fuel, but said it is confident it would continue to outperform its nearest rivals, underscoring the competitiveness of the U.K.'s food-retailing sector.

Also, last week Home Retail reported slowing losses at Argos and backed the recently lowered fiscal 2016 guidance. The firm said comparable sales at Argos for the year ended Feb. 27 are down 2.6%. This compares with a fall of 2.8% for the 44 weeks ended Jan. 2, and sales in the last eight weeks of the year down just 1.1%.

It said it expects full-year benchmark pretax profit to be £ 93 million, compared with guidance given in January for the bottom end of the £ 92 million to £ 118 million range.

Separately, Steinhoff International said Friday that it has agreed to buy London-listed, France-focused consumer electronics retailer Darty PLC for £ 673 million.

Write to Ian Walker at [e-mail] and Rory Gallivan at [e-mail]

(END) Dow Jones Newswires

March 18, 2016 14:55 ET (18:55 GMT)

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