Home Retail slumps as Steinhoff backs out, Sainsbury's ups bid

Shares in Argos owner Home Retail Group tumbled in afternoon trade after Steinhoff International Holdings abandoned the chase in favour of a bid for Darty, clearing the path for Sainsbury’s, which later upped its bid.

“Steinhoff now confirms that it does not intend to make an offer for HRG,” said the South African company, which had until the end of play on Friday to make a firm intention of an offer or walk away.

With Steinhoff no longer in the picture, Sainsbury’s - which was given the same deadline as Steinhoff by the Takeover Panel - was in prime position to seal a deal after it agreed the terms of a £1.3bn takeover back in February.

The supermarket put out an announcement one minute after markets closed, tweaking its bid up to 173p, having found another £40m of synergies, valuing Home Retail at approximately £1.4bn.

Home Retail shareholders will be offered 0.321 new Sainsbury's shares and 55p in cash, and are also likely to receive a special dividend of 27.8p per HRG share.

Steinhoff walked away from Argos as its French business Conforama has instead agreed to buy electrical retailer Darty for 125p in cash per share.

This represents a premium of 54.3% to Darty's 81p closing price on 29 September, which was the last business day prior to the start of the offer period.

At 1547 GMT, Home Retail shares were down 10.2% to 162.70p while Sainsbury’s shares were off 2.1% to 275.70p.