Sainsbury’s’ successful £1.3bn bid for Home Retail Group – Argos in other words, now that Homebase is being sold to Australians – is puzzling in lots of ways. One because Sainsbury’s has a lot on its plate battling Aldi and Lidl (and Tesco which will surely start recovering soon).
Two because it’s something of a miracle that Argos (left) is still with us anyway; its traditional format of catalogues/high street shops is clearly out of snc although it has had some success in switching sales online. But is it really a credible rival to the likes of Amazon?
Homebase, which was an offshoot of Sainsbury’s back in the day, might look a better fit.
But Sainsbury’s CEO Mike Coupe has convinced his shareholders that Argos is worth a 63 per cent premium to its pre-bid share price on the grounds that it adds a big non-food business (bigger than John Lewis apparently) and £1.3bn is a reasonable price to pay for that and a business that’s done a lot of the online heavy lifting.
Intriguingly the deal may pit Argos agency CHI against Sainsbury’s’ AMV BBDO, the same rivalry that currently obtains at Dixons Carphone where AMV handles the Dixons bit with CHI the AOR for Carphone. Carphone, though, has become markedly more complicated as Brothers and Sisters has inserted itself on to the roster with its Keith Lemon online campaign, where most of Carphone’s money seems to be going these days.
Sooner or later both Dixons Carphone and Sainsbury’s/Argos will surely think about rationalising their main agencies. Is Argos a direct competitors to Dixons though? Clearly it is on lots of fronts. CHI founder Johnny Hornby may be reminding them of this although that might mean giving up on Carphone.
Client attitudes to conflicts have changed quite markedly in recent years, with the growth of ‘team this and that’ bespoke creative agencies and most big media accounts being handled, ultimately, by a central unit of WPP, Omnicom, Publicis Groupe or Dentsu/Aegis.
The Sainsbury’s deal for Argos has provoked a lot of head scratching in the City. Its implications will be prompting the same in parts of adland.