Sainsbury’s face new competition as they near the collection point for Argos order
22 February 2016 by Ashton Carter
An offer has been made by Sainsbury’s to purchase Argos’ parent company, Home Retail Group, for a massive £1.3bn. However, after reaching an agreement in principal and carrying out weeks of due diligence, Sainsbury’s plans have now gone awry.
South African retail group Steinhoff, owner of companies such as Bensons for Beds and Harveys, have now put in their own bid for Home Retail Group at just over £1.4bn. Home Retail Group’s share price rose by over 12% to 173p in response to the bid, which is just shy of the 175p per share offered by Steinhoff.
However, Sainsbury’s troubles do not end there. Sources suggest that, due to the large overlap in the sale of electrical appliances by both Sainsbury’s and Argos, any acquisition would require the approval of the Competition and Markets Authority. Due to the size of the companies involved, this is likely to require a full two-stage investigation of the effects on competition in the market before any decision can be reached.
Such an investigation would take months and the resulting uncertainty may discourage Sainsbury’s from making a further bid. On the other hand, the fact that Sainsbury’s are already weeks into the due diligence process may make them reluctant to abandon the deal, and confident that Home Retail will choose to continue with them if they were to match Steinhoff’s offer.
Sainsbury’s now have a limited time to either put in a higher bid or make a request to Home Retail for an extension of time.
If you are in need of assistance with an acquisition or merger, or are looking for advice on anti-competitive effects within a market, please contact our Corporate Commercial Department on 01245 584515 or [email protected]
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