Home Retail Group board backs £1.4bn Sainsbury's deal

After four months of negotiations, the board of Home Retail Group has confirmed it is backing the £1.4bn takeover bid from supermarket chain, Sainsbury’s, and is encouraging shareholders to support the offer.

The new group is estimated to be worth in the region of £6bn and will be looking to compete with John Lewis, Marks & Spencer and Amazon.

The £1.4bn deal will see Sainsbury’s pay 55p in cash and provide 0.321 of its own shares per Home Retail Group share, which gives Home Retail Group a value of £1.2bn, or 143.7p a share based on Sainsbury’s closing share price on Thursday.

In addition, Home Retail Group shareholders will receive 25p per share following the sale of Homebase to Wesfarmers for £200m, along with 2.8p per share instead of a final dividend payment following the end of the Home Retail Group financial year.

David Tyler, Sainsbury’s chairman, said: “We are very pleased the board of Home Retail has recommended our offer for the acquisition of its business to its shareholders. The combined business will offer a multi-product, multichannel proposition, with fast delivery networks, which we believe will be very attractive to customers and which will create value to both sets of shareholders.”

Steve Clayton, head of equity research at Hargreaves Lansdown, said: "This deal catapults Sainsbury's exposure to non-food items forward by around £4bn a year, and offers tantalising synergies from integrating the Argos estate and delivery capabilities with Sainsbury's own.

"For Home Retail investors, the deal offers a welcome recovery in the value of their investment, following many years of difficult trading."

The deal is expected to close in the third quarter of the year.

See the full announcement here.

Source: Insight DIY