Home Retail investor Old Mutual backs Sainsbury's "fair" takeover offer

Argos will become part of Sainsbury's if a £1.3 billion deal gets the go-ahead

Andy Rain/EPA

3 February 2016

A major shareholder in Argos owner in Home Retail Group has deemed Sainsbury's £1.3 billion takeover offer "fair".

Sainsbury's and Home Retail on Tuesday revealed that they had agreed a cash and shares deal worth 161.3p per Home Retail Share.

Along with many in the City, Old Mutual Global Investors, which is listed as Home Retail's third largest shareholder and holds 3.6% of the its shares that carry voting rights, had been hoping for a deal around the 200p a share mark.

But today the firm said that recent developments, including the sale of Home Retail's DIY chain Homebase to Australia's Wesfarmers for £340 million and the group's Christmas trading - Argos like-for-like sales were down 2.2% between August and January - had softened its view on the price.

"Following discussions with representatives of both parties, we have concluded that the terms of the agreed offer are fair, reflective of the future potential of the Argos business and the risk still associated with the transformation plan," the investor said in a statement.

Argos has been trying to revive its fortunes will a digital overhaul of stores and initiatives such as same-day delivery.

Sainsbury's, which already has Argos concessions in some stores, said the deal was "the right thing for the business" and "financially compelling".

The offer now faces a shareholder vote and regulatory scrutiny, but should it go through, will see Home Retail investors receive 55p per share in cash, along with 0.321 new Sainsbury’s shares.

Home Retail shareholders would then own 12% of the total group.

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