• Sainsbury’s possible offer values Home Retail at approximately £1.3bn
  • Home Retail’s board will recommend the offer to shareholders
  • Sainsbury’s believes it can make EBITDA synergies of £120m within three years

Sainsbury’s has reached an agreement with Home Retail over the asking price for the business ahead of this evening’s takeover deadline.

The possible offer, along with proposed capital returns, implies a value of 161.3p per Home Retail share and would value the business at approximately £1.3bn.

Sainsbury’s looks set to offer Home Retail shareholders 55p in cash per share, along with 0.321 new Sainsbury’s shares.

In addition, shareholders would receive approximately 25p per share attached to the sale of Homebase and an additional 2.8p in lieu of a final dividend in its current financial year.

The Home Retail board has indicated to Sainsbury’s that it will recommend the possible offer to its shareholders.

Sainsbury’s believes that merging the two companies will generate EBITDA synergies of £120m or more within three years of the deal completing.

It expects half of the synergies to be generated from Argos concessions. It forecasts cost savings from relocating some Argos stores into Sainsbury’s premises and a sales boost from the new concessions.

Meanwhile, a third of synergies will come from sharing central and support functions at the two retailers, along with its stronger buying power.

The remainder of the identified synergies will come come from selling Sainsbury’s clothing, homewares and seasonal and leisure ranges in Argos stores.