Sainsbury’s share price: Group agrees terms of possible offer for Home Retail

Sainsbury’s (LON:SBRY) share price declined at the opening bell this morning, after the British grocer said that it had reached an agreement on the terms of a possible offer for Home Retail Group (LON:HOME).

Under the terms of the proposal, Home Retail shareholders will receive 0.321 new Sainsbury’s shares and 55p in cash for each share they own. They will also receive a payout of 25p per share and 2.8p in lieu of a final dividend in respect of the financial year ending February 27. The possible offer implies a value of around £1.1 billion for the Argos owner, based on the 242.55p closing price of Sainsbury’s shares yesterday. Including the proposed capital returns, the total bid climbs to £1.3 billion.

Home Retail’s board said the combination of the two companies was “an attractive proposition for the customers and shareholders of both companies, establishing a platform for long-term value creation”. Sainsbury’s further noted that savings attributable to underlying earnings are expected to amount to at least £120 million in the third full year after completion of the deal.
Sainsbury’s made an initial approach for the Argos owner in November, but the FTSE 250 group rejected it and negotiations stalled over the price last month. The supermarket chain had until 17:00 GMT today to make a formal offer or walk away for six months. Home Retail’s board has asked the Takeover Panel for an extension to the deadline until 23 February to allow time for Sainsbury’s to make a firm offer.
Sainsbury’s share price opened in negative territory this morning. However, by 08:15 GMT, the stock had gained some ground, trading 0.20 percent higher at 245.30p. Meanwhile, Home Retail’s share were changing hands at 148.90p, 2.16 percent down intraday.
As of 08:36 GMT, Tuesday, 02 February, J Sainsbury plc share price is 243.80p.