Sainsbury’s Upbeat On Benefits Of Argos Deal Despite Brexit Vote

Sainsbury’s has reaffirmed its desire to purchase Argos-owner Home Retail despite the economic uncertainty caused by the result of the EU referendum.

Following the publication of a 188-page prospectus for the £1.4bn deal, Sainsbury’s Chief Executive Mike Coupe acknowledged the risk of the UK slipping into recession, which is likely to impact non-food sales. However, Coupe stated that he was still “committed to making the deal happen”, adding: “We remain absolutely convinced by the strategic rationale and we think it will strengthen our business.”

Whilst noting that the economic conditions had changed since the takeover was agreed earlier this year, Coupe said it was still too early to fully understand the impact of Brexit on Sainsbury’s and Argos. “I think it’s very early days. There is a slight danger that we talk our way into an economic downturn as well,” he said.

In the prospectus, Sainsbury’s said it expected to employ around a 1,000 more retail staff as a result of the deal, partly to man more click & collect points. However, it also warned that up to 600 head office jobs were at risk.

The deal is currently being scrutinised by the Competition and Markets Authority (CMA), who will decide by 25 July whether or not to launch a full investigation. If approved, Sainsbury’s hopes to complete the acquisition by the end of September.

On Monday, Sainsbury’s announced that it was pulling the plug on it Netto stores venture to enable it to focus on the Home Retail deal.

NAM Implications:
  • A positive attitude has to be the right approach amidst the Brexit uncertainty…
  • Apart from the distraction in the meantime, a full investigation by the Competition and Markets Authority (CMA) is unlikely…
  • Leaving pro-active NAMs to build appropriate strategies, whilst others wait and see…