Sainsbury’s facing competition from South Africa’s Steinhoff to acquire Home Retail Group

Sainsbury’s proposed takeover of the Home Retail Group looks to be in jeopardy following the news that another bidder has come forward with a higher offer. .

Steinhoff International, a South African retail conglomerate that owns Harveys and Bensons for Beds in the UK as well as France-based furniture chain Conforama, on Friday put forward a 175p per share offer, valuing Home Retail at £1.42bn. This compares to Sainsbury’s offer which is worth 167p per share and values the owner of the Argos chain at £1.35bn. 

Sainsbury's was due to make a firm offer for Home Retail tomorrow but reports this morning suggest it will now go back to the Takeover Panel and request a further extension until the 18 March when Steinhoff must also make a firm bid. 

A statement from Home Retail said it was reviewing Steinhoff’s proposal and it would make a further announcement soon. It urged its shareholders to take no further action in the meantime. 

The rival bidder said it was still supportive of Home Retail’s planned sale of its Homebase division to Wesfarmers, which was due to return £200m to shareholders. 

Analysts have been sceptical about Sainsbury’s plans, although the retailer’s management has stated that combining its business with Argos would enable it to expand its non-food and online operations, allowing it to take on the likes of Amazon and John Lewis. It has said that the merger would bring savings in the region of £120m, much of which would come from putting Argos stores into Sainsbury's outlets. 

However, the supermarket group has stressed that it will not overpay to secure a deal and analysts said that Steinhoff has significant financial muscle which could force Sainsbury’s to drop its plans if the two firms got into a bidding war. With a strong presence in the furniture market, there are also plenty of synergies for Steinhoff in owning Argos. 

Steinhoff is 20% owned by South African retail billionaire Christo Wiese, who also has stakes in New Look and Iceland Foods.