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Sainsbury's agrees to buy Argos owner for £1.2 billion

Sainsbury's said the deal would make it a 'world-leading' retailer Credit: PA

Sainsbury’s has bought out the Argos owner Home Retail Group for £1.2 billion.

The deal comes after four months of tough negotiations which saw South African rival Steinhoff abandon its bid to buy the group earlier today

Sainsbury’s said the buyout would allow it to become a "world-leading" retailer as the supermarket sector comes under intense competitive pressure, and will create £160 million of cost savings.

The UK grocery retail industry is undergoing a period of intense change in customer shopping behaviour and in the competitive environment.

We will create a multi-product, multi-channel proposition with fast delivery networks that we believe will be very attractive to the customers of both businesses."

– David Tyler, Sainsbury's chairman

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Argos owner receives takeover bid from South African firm

Argos are currently owned by the Home Retail Group. Credit: PA

Sainsbury's could be drawn into a bidding war for Home Retail Group after it was announced the Argos owner is considering a rival offer from a South African-based retailer.

Steinhoff, which makes furniture, made the approach to the Home Retail board earlier today.

They are now reviewing the proposal and have asked shareholders to take no further action.

The news comes after Home Retail had previously said it was willing to recommend the Sainsbury's bid which valued the company at £1.3 billion.

Sainsbury's tables £1.3bn bid for Home Retail Group

Sainsbury's is close to taking over Home Retail Group. Credit: PA

Supermarket giant Sainsbury's has tabled a proposed bid to take over Home Retail Group - the owners pf Argos and DIY chain Homebase - in a deal worth up to £1.3 billion, the retailer said.

Sainsbury's had an initial approach for Home Retail Group rejected in November, but the two sides were locked in negotiations over the weekend.

Sainsbury's boss Mike Coupe said a potential tie-up would create the UK's largest non-food store, a £6 billion giant.

But analysts question whether Sainsbury's might be biting off more than it can chew by taking on Argos.

ITV News Business Editor Joel Hills reported that shareholders in Home Retail Group would receive a 12% stake in the new business once a deal is finalised.

Chief among Mr Coupe's plans will be to leverage the power of Argos's online business and strong customer appetite for its click & collect service.

He also hoped to launch a raft of Argos concessions in Sainsbury's supermarkets in an effort to boost footfall.

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