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Sainsbury's has said that it is considering making an offer to buy Argos owner Home Retail Group.
The grocer said that it had approached Home Retail Group with an offer of shares and cash in November but that this was rejected. It is now considering a new offer and has until February 2 to make one or walk away under takeover rules.
Sainsbury's has been trialling Argos concessions in its stores since January. It said that the combination of Sainsbury's and Argos is good for customers and shareholders in both companies.
"The combination is an opportunity to bring together two of the UK's leading retail businesses, with complementary product offers, focused on delivering quality products and services at fair prices, through an integrated, multi-channel proposition," Sainsbury's said.
Home Retail Group has been the subject of takeover speculation in recent months after reports that a private equity company was circling in November. The retailer has struggled to keep pace with online competition.
Less than an hour after the announcement, shares in Home Retail Group had gone up more than 35 per cent.
Sainsbury's has suffered in the supermarket wars that have seen discount brands like Aldi and Lidl take a bite out of the big supermarkets' profits.
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“The discounters still represent a significant threat to mainstream supermarkets in particular,” Sainsbury's CEO Mike Coupe said in November.
Sainsbury's is looking to Argos to fill space in its stores, it said in the statement released on Tuesday, as well push up profits and expand the range of products on offer.
Sainsbury's said it was attracted by "the ability to sell to each other's customers, including the operation of Argos concessions within Sainsbury's stores, and the sale of Sainsbury's products and services through Argos's network."
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