Sainsbury’s warns up to 600 jobs could go in merger with Argos owner Home Retail Group

Sainsbury's chief executive insisted the merger deal would go ahead despite increased economic uncertainty since Britain’s vote to leave the EU

Zlata Rodionova
Wednesday 06 July 2016 13:16
Sainsbury’s says it is prepared to walk away from the HRG deal
Sainsbury’s says it is prepared to walk away from the HRG deal

Sainsbury’s has hinted that 600 head office jobs may be lost as it goes ahead with a £1.4 billion deal to buy Home Retail Group, the owner of Argos.

Sainsbury's outlined the reduction of nearly 400 to 600 roles across corporate and support functions roles in a document issued in the run up to its proposed acquisition of the Home Retail Group.

The final number will not be known until the takeover is completed, which is expected to be in September.

The retailer has however promised to create more than 1,000 shop staff in the next three years.

The news of potential redundancies came as Sainsbury’s as Mike Coupe, chief executive, insisted the merger deal would go ahead despite increased economic uncertainty since Britain’s vote to leave the EU.

Coupe, Sainsbury’s CEO since 2014, said he remained “absolutely convinced by the strategic rationale of the deal, regardless of what economic conditions prevail.”

Coupe recognised the economic conditions after the referendum have changed, but warned people against reading too much into the results of post-Brexit surveys, which have indicated a drop in consumer confidence.

“To predict the future off 10 days' worth of data I think is impossible,” he said.

John Rogers, who is to run Argos once the deal is completed, said it was “standard practice to recognise the economic volatility.”

“It's sensible to include a risk that captures the volatility of the economic environment... We've called Brexit out specifically because that's something that's very current in the economic backdrop,” he said.

Home Retail Group agreed to the Sainsbury’s takeover deal in April this year.

The UK’s second biggest supermarket was left a clear run to buy Argos, which sells electricals, jewellery and other general goods, when rival suitor Steinhoff International withdrew in March.

The cash and shares deal was was worth about 1.4 billion at the time. But Sainsbury's shares have fallen 19 per cent over the last three months, reducing the deal's value.

The news comes after Sainsbury's announced it was ending its joint venture trial Netto chain of discount stores, putting 400 jobs at risk.

The two companies had hoped Netto could rival established discount supermarkets, Lidl and Aldi.

But Mike Coupe said the company needed to focus on its core business and the integration of Argos.

“To be successful over the long-term, Netto would need to grow at pace and scale, requiring significant investment and the rapid expansion of the store estate in a challenging property market,” Coupe said

”Consequently, we have made the difficult decision not to pursue the opportunity further and instead focus on our core business and on the opportunities we will have following our proposed acquisition of Home Retail Group,” he added.

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