Argos to pay £900m for Homebase chain

Author: By Megan Davies, City Editor, PA News

Argos owner GUS is buying DIY chain Homebase in deal worth around £900 million, it was announced today.

GUS said the deal was in line with both groups’ strategies to expand in the growing market for furniture and homewares.

Chief executive John Peace said: “For the last three years, we have been repositioning our portfolio of businesses to focus on growth. The acquisition of Homebase is a further example of our determination to create shareholder value.”

GUS said it was planning to bolster Homebase’s store opening programme following the deal. Homebase, which is the third largest DIY retailer in the UK behind B&Q and Focus Wickes, currently has 272 stores but it is planned that up to 30 new stores will be opened over the next three years.

GUS also said it would accelerate Homebase’s move into home furnishings.

The group said customers would benefit from broader choice, while better value would be created from savings on the supply chain side.

GUS added Homebase would become part of its Argos Retail Group, which also includes GUS’s home shopping operations, but from a customer perspective, it would remain separate from the Argos chain.

Mr Peace added: “With our experience of revitalising Argos and integrating major businesses, the Argos Retail Group management team is well-equipped to drive Homebase’s future growth and development.”

GUS is buying the Homebase chain, which employs more than 17,000 staff, from private equity group Permira, which owned a majority stake in the business, and supermarket chain Sainsbury’s.

Permira bought the group in December 2000 from Sainsbury’s in a £750 million deal, and turned the chain around, increasing trading profit by threefold over the two years.

Sainsbury’s retained a stake in the business but today said it had agreed to sell its 17.3 per cent shareholding for around £139 million.

Charles Sherwood, partner at Permira, said: “This has been a great deal for all concerned.

“Permira Funds, Sainsbury’s, Homebase employees and customers have all benefited from the significant changes made to the business over the past two years.

“The new management team has delivered a step change in financial performance and cash generation. GUS plc is making a strategic acquisition of a strong, well differentiated and highly performing business.”

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