J Sainsbury made an informal offer for Home Retail Group (HRG) last November, it emerged this week. Shares in HRG, which consists of high-street catalogue retailer Argos and DIY chain Homebase, jumped when the news was disclosed, valuing the group at around £1bn. HRG rejected the approach from the supermarket, which has until early February to make a formal offer. Sainsbury's is primarily interested in Argos, which it already allows to operate in some of its bigger stores. It is expected to sell off Homebase if a deal goes ahead.
What the commentators said
All the effort required to pep it up and integrate the two groups could distract Sainsbury's from its key battle fending off the discounters. It has been doing better than its rivals Tesco and Morrison's in this, so "why risk the good work" by paying two years' profits for a chain that analysts call "structurally challenged"? "You don't need a GCSE in history to understand the folly of fighting a war on two fronts," agreed James Moore in The Independent. A better option, given that the group has been holding its own against discount retailers Aldi and Lidl, would be to "push out of the slow lane [its] venture into the discount sector with Netto". But apparently that's "not on the table".
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