Sainsbury's makes a bold takeover approach for Home Retail Group

Sainsbury's is pushing an audacious takeover approach for Home Retail Group, the company behind Argos and Homebase. The proposed deal would have seen the supermarket emerge as one of the biggest retailers on high street.

However, Home Retail Group rejected the offer in November, saying that it undervalued the business and ''its long-term prospects''.

Shares of Home Retail shot 41 per cent, while Sainsbury's shares fell 5 per cent.

The approach initially came only weeks after a shock profit warning by Home Retail, calling Black Friday too unpredictable to provide accurate guidance to investors. The company will report to the stock market next week on its Christmas trading.

The failed bid came to light after two months as shares in the takeover target started rising last morning, a matter that the Financial Conduct Authority is expected to investigate to ensure there was no insider dealing.

It had come to light that the Takeover Panel approached Home Retail after the share price increase to remind the company of its obligation to inform the stock market of any price-sensitive information.

The bold approach by the UK's third-largest grocer for Home Retail Group, which is also owner of Homebase, would have seen two of the biggest High Street players join hands, with Argos counters opening at Sainsbury's stores

Supermarkets and other retailers are facing tough competition from shopping websites, that have lower costs and can cut down prices.

Speed of delivery had become a key selling point, with Amazon is now promising delivery within one hour in some parts of the UK. The big grocers also have to contend with competition from discount supermarket chains such as Aldi and Lidl.