Argos owner backs £1.4bn Sainsbury's takeover, the deal is likely to lead to store closures

Up to 200 Argos outlets could face the axe...

Argos owner backs £1.4bn Sainsbury's takeover, the deal is likely to lead to store closures

Argos in the Ilac Shopping Centre in Dublin | Image:

The board of Argos owner Home Retail Group has agreed to support a takeover by Sainsbury's in a £1.4bn deal - which could see hundreds of Argos branches close.

It comes after the supermarket won a takeover battle with South Africa's Steinhoff, which withdrew from its attempt to buy the retailer two weeks ago.

The tie-up will create a £6bn non-food operation putting the new business in the same league as John Lewis and Marks & Spencer and also taking on online giant Amazon.

But Sainsbury's has said it plans to relocate many Argos stores within under-occupied space in its supermarkets, threatening the closure of up to 200 sites.

Argos currently has 845 stores and notched up sales of more than £4bn for the year to the end of February.

Sainsbury's has not confirmed the number of sites that will close but says that after the takeover there will be more than 2,000 sites when taking into account concessions and click & collect points as well as stores.

The latest announcement said rolling out concessions within Sainsbury's stores would "increase the attractiveness of these locations" and deliver cost efficiencies.

Around 55% of these concessions will be relocated Argos stores, with half of these moving less than a mile.

The cash-and-shares takeover deal, when including a £200m pay-out to Home Retail Group shareholders, values the company at around £1.4bn.

It is conditional on approval by shareholders and regulators and is expected to complete in the third quarter of this year.

Sainsbury's said it was "making good progress" amid the ongoing supermarket price war against major rivals Tesco, Asda and Morrisons.

Now it wants to accelerate its efforts to cash in on the high level of customer visits to its stores "to compete across a broad range of products and services, beyond its food heritage."

The deal is also expected to deliver annual cost savings of £160m.

Sainsbury's chairman David Tyler said: "The combined business will offer a multiproduct, multi-channel proposition, with fast delivery networks, which we believe will be very attractive to customers and which will create value to both sets of shareholders."