An Argos/Homebase divorce looks increasingly likely

But will Sainsbury's be there to pick up the pieces?

by Jack Torrance
Last Updated: 22 Feb 2016

It looks like things could be falling into place for Mike Coupe. The boss of Sainsbury’s is keen to acquire Argos, to get his hands on its massive range of products and souped-up distribution network. His attempts to buy its parent Home Retail Group (HRG) back in November were rebuffed, but he remains undeterred. 

One hurdle he had to overcome was the fact HRG also owns Homebase, but now it looks like the ailing DIY chain could be taken out of the equation. Last night HRG confirmed it was in advanced talks to sell Homebase to Australian conglomerate Wesfarmers for a pretty sizeable £340m.

Australia's largest private sector employer is home to a familiar face: reverred former Asda boss Archie Norman, who reportedly played a key role in the Homebase bid. Could he be on the way back to the UK with plans to make DIY sexy again? 

Read more: Why Sainsbury's wants to buy Argos

The news shouldn’t come as much of a surprise. HRG has struggled to turn around Homebase’s fortunes as a new generation of ‘lazy’ renters turned away from DIY. It doesn’t help that wheelbarrows and grow bags are a lot harder to sell online than the smaller goods that fill most of Argos’s catalogues.

While HRG has been investing in Argos and opening more stores, it has shuttered dozens of Homebase shops over the past few years. Its latest figures, revealed this morning, showed like-for-likes up by 5%. But total sales have slipped by 4% as it began to feel the effect of said closures.

If the sale does go ahead, HRG plans to return £200m of the £340m to shareholders and spend most of the rest on restructuring, transaction costs and pension obligations, retaining just £15m. This is great news for Coupe.

There’s been some scepticism about the viability of his plan to integrate Sainsbury’s with Argos. But it will be easier to pull off such a deal if he doesn’t have to come up with the money to pay for Homebase as well.

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