Sainsbury’s will sell its Tu clothing range in Argos stores if a £1.3bn deal to acquire the latter’s owner, Home Retail Group, goes through.
Sainsbury’s has agreed preliminary terms to buy Home Retail Group to create a combined food and non-food retailer.
The two companies said the deal would bring together their multichannel capacities, including digital, store and delivery networks. It would optimise the use of their combined retail space, creating a “strong presence across food and grocery, clothing, homewares, toys, stationery, electricals, furniture and other general merchandise”.
Approximately half of the projected cost savings to come from the deal will be made by relocating existing Argos stores into Sainsbury’s stores and cross-selling opportunities between stores. A third will come from streamlining central and support functions and the combined buying power.
The remainder would come from the sale of Sainsbury’s clothing, homewares and seasonal and leisure ranges through the existing Argos network.
The deal depends on the prior sale of Home Retail Group’s DIY chain Homebase to Australia-based Wesfarmers. Wesfarmers has agreed to buy the retailer for £340m.
Sainsbury’s has three weeks carry out due diligence. The deadline for a firm offer for Home Retail Group is February 23.
Argos currently sells the Cherokee range of clothing, footwear and accessories online and in stores, as well as a limited collection of Trespass menswear and kidswear.