Homebase set for GUS 10-store plan

General merchandise giant Argos, controlled by GUS, will open up to 10 new Homebase stores a year following its£900 million takeover of the DIY group.

The acquisition, subject to OFT clearance, is expected to enable Argos to boost its strength in the£20 billion home furnishings market. Argos already has furniture and homewares sales in excess of£1 billion.

The furniture and homewares focus will, according to Argos, give 272-strong Homebase increased differentiation from other players in the£12 billion DIY market.

The sectors are expected to converge and Argos Retail Group chief executive Terry Duddy dismissed fears that potential in furnishings would be offset by exposure to DIY, dominated by Kingfisher's B&Q.

He admitted Argos has also looked at Focus Wickes, but said: 'The Homebase brand can be stretched. We think Homebase has a lot further to go than Focus Wickes.'

Argos is buying Homebase from venture capitalist Permira, which acquired the business from Sainsbury's for£750 million two years ago. Permira partner Charles Sherwood said: 'We've tried to take the business away from competing with B&Q. Value has been created not by financial engineering, but by changes to the Homebase business.'

Sixty Homebase managers, who own 11 per cent of the business, will share an estimated£16.5 million on the sale of their stake. Chairman John Lovering will stand down and chief executive Rob Templeman will leave after the key Easter trading period.

Homebase is expected to achieve an operating profit of£100 million this year, up from£86 million.

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