Sainsbury’s boss has earned his shot at proving his critics wrong on Argos

Outlook

Sainsbury’s recently went public about a takeover of Homebase and Argos owner Home Retail Group (Getty)

How you feel about Sainsbury’s formal £1.3bn approach for Argos owner Home Retail Group (HRG) really depends on whether your glass is half full or half empty.

The half-full case holds that Sainsbury’s isn’t actually paying anything like that amount. The £1.3bn includes £200m from the sale of HRG’s Homebase subsidiary to Australia’s Wesfarmers plus the final dividend HRG shareholders had been due for the financial year ending 27 February.

A further £250m comes off the top through the cash on Argos’s balance sheet, and another £600m from its loan book, which will be “sold” on to Sainsbury’s Bank. That gets you to less than £300m, which suddenly looks a lot more reasonable.

The half-empty case is that the price, at 161p a share, still represents a huge premium of 63 per cent on what HRG was trading at before Sainsbury’s interest was revealed. It was the fourth proposal the grocer had tabled, and the earlier sallies included at least one “this is it, our final offer – take it or leave it” warning. Until said offer proved to be not quite as final as the suitor had said it was.

While only the real sceptics felt Sainsbury’s might have picked Argos up from an administrator’s lock-up, plenty felt it might have got a cheaper price by waiting for the stock market’s mid-season sale – particularly of Argos had indulged in another of its profit warnings.

But, having roundly trashed the deal, the City has started to come around. Sainsbury’s chief executive Mike Coupe seems to have sold it on his vision of Argos click-and-collect hubs in every Sainsbury’s. And let’s face it, it’s not as if his grocery business is going to grow much over the next few years, so why not let him experiment?

As my colleague Andrew Dewson noted last week, Jeff Bezos has made a habit of proving Wall Street’s sceptics wrong with Amazon. Mr Coupe is not in that league yet, but he has proved himself to be an effective boss at Sainsbury’s, so perhaps he should get a shot at doing the same thing.

Just as long as the remuneration committee keeps its powder dry. Mr Coupe and his team may due a payday if they get the merged operation singing – but not before.

There are still a lot of doubters out there and proving them wrong should be all the incentive he and his team need.