Sainsbury’s to sell Argos in £120m cut-price deal
Sainsbury’s has said it will sell long-struggling catalogue retailer Argos for £120m, a fraction of the £1.1bn it bought it for a decade ago.
The supermarket giant has struck a deal with Swift Partners – a new company led by On the Beach chairman Richard Pennycook and former Morrisons boss Trevor Strain. Their takeover will be backed by private equity firm True Capital.
Sainsbury’s bought Argos in 2016 and the retailer has long since dragged on the supermarket’s profits, fuelling rumours that it would seek to offload the business.
The supermarket said the sale will enable it to focus on its food business and deliver higher cash generations and healthier margins.
The deal will deliver cash proceeds of at least £120m, Sainsbury’s said, including £70m to be paid when the deal is completed in February.
Sainsbury’s to focus on growing food sales
Sainsbury’s chief executive Simon Roberts said: “Sainsbury’s has transformed Argos into a leading multichannel retailer with millions of customers and thousands of talented colleagues.
“Having rebuilt the core strengths of our food business, this agreement allows us to focus all our resources and investment on the significant opportunities ahead.”
The UK’s second-largest supermarket paid £1.1bn for Argos in 2016, but the catalogue retailer was valued at only £344m in its most recent accounts.
Argos generated £4.1bn in sales last year, compared to £25.9bn in sales at Sainsbury’s supermarkets. “Argos trading continues to reflect a subdued general merchandise market,” the group said in April.
‘Opportunities to invest in Argos’
Announcing the deal, Pennycook said: “What attracted us to Argos is the strength of the business, with a trusted brand, loyal customers and dedicated colleagues. We believe strongly in Argos’s future and see real opportunities to invest and build on its progress.
“Trevor, Matt and I share a strong belief in Argos, its people and what it can achieve in the years ahead. We are all making a long-term commitment to the business.”
True Capital was founded in 2013 by Matt Truman, who will serve as a principal shareholder of Argos, and Paul Cocker.
The group describes itself as a consumer and retail investment and advisory firm, and has spent £150m in private equity investments and £5m in venture capital stakes since its establishment.
The initial £70m sum will include the proceeds of a sale of an Argos warehouse. A further £50m will be paid to Sainsbury’s over the following three years.
The deal will knock £250m off of Sainsbury’s net debt, it said. The supermarket expects to take a £350m one-off accounting hit from the deal.
Sainsbury’s shares jumped more than five per cent to 374p in early trading.