The forthcoming acquisition of major British retail chain Argos by supermarket giant Sainsbury’s will create a broader-based retail group that could become a major player for deliveries of groceries and e-commerce orders in the UK.
The board of the Home Retail Group (HRG), the Argos parent company, accepted Sainsbury’s offer of £1.4 billion on April 1 and recommended that shareholders should accept the 172.3 pence per share offer. The deal is expected to go through in the third quarter of this year.
Sainsbury’s, with over 1,370 supermarkets and convenience stores across Britain, is the much larger of the two firms with annual revenues of nearly £24 billion. Argos, with 845 stores, had sales of £4.1 billion in the year ending February 2015.
Sainsbury’s chairman David Tyler stated: “The combined business will offer a multi-product, multi-channel proposition, with fast delivery networks, which we believe will be very attractive to customers and which will create value to both sets of shareholders.”
The takeover will enable Sainsbury’s to accelerate its strategy of developing its non-food activities, especially clothing and general goods, where it sees strong growth potential, and thus reduce its dependence on the supermarkets business.
But there will also be opportunities for the enlarged group to seek synergies and integration of their logistics and delivery operations, for example when offering click & collect and “fast to home” delivery.
Explaining the rationale for the deal, Sainsbury’s noted that Argos could expand its click & collect offer to Sainsbury’s supermarkets as part of relocating stores from existing locations or opening new outlets in supermarkets. The two firms have already been cooperating with trial Argos outlets in 10 Sainsbury’s supermarkets. In addition, Sainsbury’s would benefit from Argos’ existing multi-channel sales and delivery activities.
“The combined group’s performance will be enhanced by its ability to offer customers a wide range of products that meet their everyday needs, available in stories, to click & collection, or delivered to home at a time that suits the customer,” they said in a joint statement.
Like other supermarket groups such as Tesco and ASDA, Sainbury’s has been expanding its online shopping offering over the last few years and offering delivery of online orders in 1-hour timeslots on seven days a week.
For its part, Argos last year launched a nationwide same-day home delivery service under the name ‘Fast Track’ with four delivery timeslots. A Fast Track Delivery costs £3.95 and customers can select from four home delivery slots: 7am-10am, 10am-1pm, 2pm-6pm and 7pm-10pm, seven days a week including Sunday. Customers can order by 6pm to have an item delivered by 10pm the same day, or schedule a convenient time on the next day or future days.
Argos planned to build up the delivery operation to some 3,300 drivers operating a fleet of 800 branded bans.
