LONDON: British supermarket group J Sainsbury Plc has agreed to buy Argos owner Home Retail Group Plc for £1.3 billion ($1.9 billion), accelerating its growth strategy by creating the country's largest general merchandise retail business.
The acquisition is a response to intense competition between British supermarket groups and makes Sainsbury's, the second-largest player in the sector, less reliant on a food market showing little growth.
Combining Sainsbury's and Argos will forge a group offering over 100,000 products from 2,000 stores.
"Our customers want us to offer more choice, that choice to be faster than ever, driven by the rise of mobile phones and digital technology," Sainsbury's chief executive Mike Coupe told reporters.
The combined group's 25 million customers would be able to shop at stores, online or on mobile devices, with a choice of delivery channels -- picked off store shelves, collected in store, or delivered to home or workplaces.
Argos built its business around a catalogue from which shoppers selected goods in stores and now has one of the most advanced online sales and delivery networks in Britain.
Home Retail, which said in January it had rejected an earlier undisclosed offer from Sainsbury's, and according to a person familiar with the matter two further offers, said it was willing to recommend a bid of 161.3 pence per Home Retail share.
"We're confident that we're able to persuade our investors and those of Home Retail that this is a deal that both should support," said Sainsbury's chief financial officer John Rogers.
Britain's grocery sector has been hammered over the last two years by the growth of discount groups including Germany's Aldi and Lidl and by online competition.
Buying Argos would allow Sainsbury's to speed up deliveries of non-food products and widen its range of electronics, appliances and toys. It could also make better use of space by shutting some Argos stores, selling Sainsbury's products in others and opening more Argos concessions in its supermarkets.
Some analysts and investors have been sceptical, pointing to poor trading at Argos and fearing that Sainsbury's management could be distracted by the integration when the supermarket sector is under huge pressure.
Coupe dismissed that concern: "There's limited risk from an execution point of view because it's largely about property, a core strength of Sainsbury's." reuters