Sainsbury’s shock bid for Home Retail Group has wrong-footed retail analysts, who called the move “baffling” and “drastic”.
This week Sainsbury’s confirmed it made an offer for the £1bn owner of Argos, Habitat and Homebase in November, which was rejected.
Sainsbury’s released a statement after a sharp increase in HRG’s share price. It now has until 2 February to make a revised offer.
The thinking behind the bid has been the subject of debate among retail analysts and the property industry. One theory is that by adding an established non-food operation to its business model, the grocer could position itself as a one-stop brand, giving it an advantage in the changing retail landscape.
Neil Saunders, managing director at retail analyst Conlumino, said: “This deal has been determined out of necessity. In its core business, Sainsbury’s won’t get future growth, so it is looking elsewhere to drive sales. It has stumbled upon this deal which would give it a different sort of business.”
Patrick Knapman, head of out-of-town retail at Cushman & Wakefield, said: “Making more efficient use of the excess space in larger stores would see it put to good economic use. It would also enable an exciting additional use of space with the use of Argos and Habitat.”
Tom Edson, JLL head of foodstores, added: “Homebase is the biggest challenge for property. It has some good locations and a size that would suit Sainsbury’s, so it could take out what it wants and redevelop or sell the rest.”
A deal would see Sainsbury’s extend its existing 598 supermarkets and 714 convenience shops with 271 Homebases and 840 Argos shops.
This would add more sale-and-leaseback properties to Sainsbury’s already leveraged portfolio, and analysts have predicted a deal could ultimately lead to as many as 200 sales.
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