Sainsbury's bids to be '˜world-leading' retailer with Argos

The supermarket giant said its proposed cash-and-shares deal - valuing Home Retail Group at 161.3 pence per share - would create the UK’s largest non-food store worth £6 billion.

Chief executive Mike Coupe threw down the gauntlet to his retail rivals as he said the tie-up would forge “an industry-leading if not world-leading” network, offering more than 100,000 products across Argos and Sainsbury’s stores.

The two companies have now agreed a three-week extension on the deadline of the deal to 5pm on Tuesday February 23 in order to complete the due diligence on the proposed offer.

But the £340 million sale of Home Retail Group’s DIY chain, Homebase, to Australian business Wesfarmers is said to be a condition of the deal going ahead.

As part of the offer, Home Retail Group shareholders will own about 12% of the combined group and get a further £200 million from the sale of Homebase.

The new proposal - which would need the approval of shareholders and the competition watchdog - comes after an initial offer from Sainsbury’s for £1 billion was rebuffed in November.

Mr Coupe said the combination of the two companies would create the “food and non-food retailer of choice” with 2,000 combined stores.

He said the business would compete “with many different companies in many different sectors”, including Amazon and John Lewis.

He added: “Our customers want us to offer more choice and for that choice to be faster than ever, driven by the rise of mobile phone and digital technology. It will enhance both businesses in the way customers respond.”

But he also warned that “it was not over until it was over” and there was always a risk another company would table a rival bid.