Recommended Offer for Home Retail Group PLC

 

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT AND INVESTORS SHOULD NOT MAKE ANY INVESTMENT DECISION IN RELATION TO THE NEW SAINSBURY'S SHARES EXCEPT ON THE BASIS OF INFORMATION IN THE PROSPECTUS AND THE SCHEME DOCUMENT WHICH ARE PROPOSED TO BE PUBLISHED IN DUE COURSE 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

FOR IMMEDIATE RELEASE

1 April 2016

RECOMMENDED FINAL CASH AND SHARE OFFER
for
HOME RETAIL GROUP PLC
by
J SAINSBURY PLC

to be implemented pursuant to a scheme of arrangement

Summary

·        Further to the announcement by J Sainsbury plc ("Sainsbury's") on 18 March 2016 (the "Original Announcement") setting out the terms of its cash and share offer for Home Retail Group plc (the "Acquisition"), the Boards of Sainsbury's and Home Retail Group plc are pleased to announce that following further discussions, the Home Retail Group Directors now intend unanimously to recommend the Acquisition.

·        With the consent of the Panel, the Boards of Sainsbury's and Home Retail Group plc have also agreed to implement the Acquisition pursuant to a court‑sanctioned scheme of arrangement of Home Retail Group plc under Part 26 of the 2006 Act (and the steps contemplated by such scheme as set out below).

·        Under the terms of the Acquisition, which will be subject to the Conditions as set out in Appendix 1 to this announcement and to the full terms and conditions which will be set out in the Scheme Document, Home Retail Group Shareholders will be entitled to receive:

For each Home Retail Group Share	0.321 New Sainsbury's Shares
	and
	55 pence in cash
	(the "Offer Consideration")

·        In addition, Home Retail Group Shareholders will also be entitled to receive the following payments:

·        25 pence per Home Retail Group Share, reflecting the £200 million return to shareholders in respect of the Homebase Sale (the "Homebase Payment"), as announced by Home Retail Group plc on 18 January 2016; and

·        2.8 pence per Home Retail Group Share in lieu of a final dividend in respect of Home Retail Group plc's financial year ended 27 February 2016 (the "Additional Home Retail Group Payment"),

(together, the "Proposed Capital Returns").

·        Accordingly, the Special Dividend referred to in the Original Announcement will not be paid.

·        Based on the Closing Price of Sainsbury's Shares of 276.3 pence on 31 March 2016, being the Last Practicable Date:

·        the Offer Consideration represents an indicative value of 143.7 pence per Home Retail Group Share and values Home Retail Group plc's issued ordinary share capital at approximately £1.2 billion;

·        the Offer Consideration and the Proposed Capital Returns together represent an indicative value of 171.5 pence per Home Retail Group Share and value Home Retail Group plc's issued ordinary share capital at approximately £1.4 billion; and

·        the Offer Consideration and the Proposed Capital Returns together represent a premium of approximately 74 per cent. to the Closing Price of 98.7 pence per Home Retail Group Share on 4 January 2016 (being the last Business Day prior to the commencement of the Offer Period).

·        Upon Completion it is expected that Home Retail Group Shareholders will hold approximately 12 per cent. of the enlarged issued ordinary share capital of Sainsbury's (based on the existing issued ordinary share capital of Sainsbury's and Home Retail Group plc).

·        The financial terms of the Acquisition (including the Offer Consideration and the Proposed Capital Returns) are final and will not be increased, except that Sainsbury's reserves the right to increase the amount of the Offer Consideration and/or the Proposed Capital Returns if there is an announcement on or after the date hereof of an offer or a possible offer for Home Retail Group plc by a third party offeror or potential offeror.

·        It is intended that the Scheme, the Proposed Capital Returns and the Acquisition will be implemented by way of a three step process summarised in paragraph 18 of this announcement, pursuant to which Sainsbury's will acquire (indirectly, following the introduction of a new holding company of Home Retail Group plc (the "New TopCo") and the subsequent reduction of capital of New TopCo (the "New TopCo Capital Reduction")) the entire issued and to be issued share capital of Home Retail Group plc.

Conditions to the Acquisition

·        The Acquisition will be subject to substantially the same terms and Conditions as set out in Appendix 1 in the Original Announcement (including regulatory clearances being received from the FCA, the GFSC and the CMA), subject to appropriate amendments to reflect that the Acquisition is to be implemented pursuant to a Scheme (and subsequent steps contemplated by the Scheme) instead of a Takeover Offer, including the deletion of the acceptance condition and its replacement with Conditions relating to the following events having occurred on or before 29 March 2017 (being the Long Stop Date):

·        approval by the requisite majorities of Home Retail Group Shareholders at the Court Meeting and the Home Retail Group General Meeting;

·        the Scheme becoming Effective; and

·        the New TopCo Capital Reduction becoming Effective.

·        Further details of the Conditions and the further terms of the Acquisition are set out in Appendix 1 to this announcement.

Recommendation

·        The Home Retail Group Directors, who have been so advised by Bank of America Merrill Lynch, consider the terms of the Acquisition to be fair and reasonable. In providing its advice to the Home Retail Group Directors, Bank of America Merrill Lynch has taken into account the commercial assessments of the Home Retail Group Directors.

·        Accordingly, the Home Retail Group Directors intend unanimously to recommend that Home Retail Group Shareholders vote in favour of the Scheme at the Court Meeting and the resolutions relating to the Scheme and the Acquisition to be proposed at the Home Retail Group General Meeting (or if the Acquisition is subsequently structured as a Takeover Offer, accept any Takeover Offer made by Sainsbury's), as the Home Retail Group Directors have irrevocably undertaken to do, or procure, in respect of their own beneficial holdings of Home Retail Group Shares amounting to, in aggregate, 1,990,679 Home Retail Group Shares, representing approximately 0.24 per cent. of the issued ordinary share capital of Home Retail Group plc on the Last Practicable Date. Further details of irrevocable undertakings are set out in Appendix 3 to this announcement.

Publication of Scheme Document and Prospectus

·        The Scheme Document will contain further information about and the full terms and Conditions of the Acquisition, notices of the Court Meeting and the Home Retail Group General Meeting and the expected timetable. The Panel has consented to Home Retail Group plc posting the Scheme Document more than 28 days after this announcement. It is expected that the Prospectus, containing further information in relation to the New Sainsbury's Shares, will be published by Sainsbury's at or around the same time as the Scheme Document.

 

·        The Acquisition is expected to Complete during the third quarter of 2016, subject to the satisfaction (or, where applicable, waiver) of the Conditions set out in Appendix 1 to this announcement.

Commenting on today's announcement, David Tyler, Chairman of Sainsbury's said:

"We are very pleased the Board of Home Retail Group plc has recommended our offer for the acquisition of its business to its shareholders. The combined business will offer a multi-product, multi-channel proposition, with fast delivery networks, which we believe will be very attractive to customers and which will create value to both sets of shareholders.

"The acquisition will now be carried out through a scheme of arrangement, helping to facilitate a speedy completion which is in the interests of the customers, colleagues and shareholders of both businesses. Our next steps are to focus jointly on ensuring we obtain the necessary regulatory clearances and that we are well prepared for the future integration of these two great retailers."

Commenting on today's announcement, John Coombe, Chairman of Home Retail Group plc said:

"Argos is both an icon of the British High Street and also a leader in the digital transformation of UK retailing. We are pleased that Sainsbury's has recognised our progress and our potential with its recommended acquisition of Home Retail Group plc. This is a testament to the vision and hard work of management and all our colleagues. We thank them for all they have done for Home Retail Group plc and Argos in particular and wish them well for the future."

This summary should be read in conjunction with, and is subject to, the full text of this announcement (including its Appendices). The Acquisition will be subject to the Conditions and certain further terms set out in Appendix 1 to this announcement and to the full terms and conditions which will be set out in the Scheme Document. Appendix 2 contains the sources and bases of certain information contained in this announcement. Appendix 3 contains details of the irrevocable undertakings from the Home Retail Group Directors received by Sainsbury's. Appendix 4 contains information relating to the Revised Quantified Financial Benefits Statement made in the Original Announcement and repeated in this announcement and the confirmations by Sainsbury's Directors and Sainsbury's reporting accountants and financial advisers. Appendix 5 includes the Sainsbury's Group's and the Home Retail Group's profit estimates and the basis of preparation relating thereto. Appendix 6 contains the definitions of certain terms used in this summary and the following announcement.

This announcement supersedes and replaces the Original Announcement.

Enquiries

Sainsbury's

Duncan Cooper, Investor Relations                                            Tel: +44 (0) 20 7695 0080

Louise Evans/Anna Harland, Media Relations                             Tel: +44 (0) 20 7695 7295

 

Morgan Stanley (Financial Adviser to Sainsbury's)

Paul Baker                                                                                Tel: +44 (0) 20 7425 8000

Ian Hart

Nick Bishop

 

UBS (Financial Adviser to Sainsbury's)

Hew Glyn Davies                                                                      Tel: +44 (0) 20 7567 8000

Anna Richardson Brown

 

Brunswick (PR Adviser to Sainsbury's)

Katie Ioanilli                                                                              Tel: +44 (0) 20 7404 5959

Mike Smith

 

Home Retail Group plc

Richard Ashton, Finance Director                                                Tel: +44 (0)1908 600 291

Mark Willis, Director of Investor Relations                                                                         

 

Bank of America Merrill Lynch (Financial Adviser to Home Retail Group plc)

Jonathan Bewes                                                                         Tel: +44 (0) 20 7628 1000

Eamon Brabazon

Geoff Iles

Luke McMullan

 

Finsbury (PR Adviser to Home Retail Group plc)

Rollo Head                                                                                Tel: +44 (0) 20 7251 3801

 

Further information

This announcement is for information purposes only. It is not intended to and does not constitute, or form part of, any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to the Acquisition or otherwise, nor shall there be any sale, issuance or transfer of securities of Sainsbury's or Home Retail Group plc pursuant to the Acquisition or otherwise in any jurisdiction in contravention of applicable law. The Acquisition will be implemented by means of the Scheme Document (or, in the event that the Acquisition is to be implemented by means of a Takeover Offer, the Offer Document), which will contain the full terms and conditions of the Acquisition, including details of how to vote in respect of the Acquisition.

Sainsbury's will prepare and publish the Prospectus containing information about the New Sainsbury's Shares. Sainsbury's urges Home Retail Group Shareholders to read the Scheme Document and the Prospectus carefully when they become available because they will contain important information in relation to the Acquisition and the New Sainsbury's Shares. Any decision or vote in respect of the Acquisition should be made only on the basis of the information contained in the Scheme Document (or, in the event that the Acquisition is to be implemented by means of a Takeover Offer, the Offer Document) and the Prospectus.

This announcement is an advertisement and does not constitute a prospectus or prospectus equivalent document.

Important notices relating to financial advisers

Morgan Stanley & Co. International plc ("Morgan Stanley"), which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting as financial adviser to Sainsbury's and no-one else in connection with the Acquisition or any other matter referred to herein. In connection with such matters, Morgan Stanley, its affiliates and their respective directors, officers, employees and agents will not regard anyone other than Sainsbury's as their client, nor will they be responsible to any other person for providing the protections afforded to their clients or for providing advice in relation to the Acquisition, the contents of this announcement or any other matter referred to herein.

UBS Limited ("UBS") which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the UK is acting as joint financial adviser to Sainsbury's and no one else in connection with the matters set out in this announcement. In connection with such matters, UBS, its affiliates, and its or their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to anyone other than Sainsbury's for providing the protections afforded to their clients or for providing advice in relation to the contents of this announcement or any other matter referred to herein.

Merrill Lynch International ("Bank of America Merrill Lynch"), a subsidiary of Bank of America Corporation, is acting exclusively for Home Retail Group plc in connection with the matters set out in this announcement and for no one else and will not be responsible to anyone other than Home Retail Group plc for providing the protections afforded to its clients or for providing advice in relation to the matters set out in this announcement.

Overseas jurisdictions

The release, publication or distribution of this announcement in or into jurisdictions other than the UK and the availability of the Acquisition to Home Retail Group Shareholders who are not resident in the UK or who are subject to the laws and/or regulations of another jurisdiction (including the ability of such Home Retail Group Shareholders to vote their Home Retail Group Shares with respect to the Scheme and the Acquisition at the Home Retail Group Meetings, or to execute and deliver Forms of Proxy appointing another to vote at the Home Retail Group Meetings on their behalf) may be restricted by the laws and/or regulations of those jurisdictions. Therefore any persons who are not resident in the UK or who are subject to the laws and/or regulations of any jurisdiction other than the UK should inform themselves about, and observe, any applicable legal or regulatory requirements. Any failure to comply with the applicable restrictions may constitute a violation of the laws and/or regulations of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person.

This announcement has been prepared for the purposes of complying with English law, the Listing Rules, the rules of the London Stock Exchange and the Takeover Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and/or regulations of jurisdiction outside the UK.

Unless otherwise determined by Sainsbury's or required by the Takeover Code, and permitted by applicable law and regulation, the Acquisition will not be made, directly or indirectly, in, into or from any Restricted Jurisdiction where to do so would violate the laws and/or regulations in that jurisdiction and no person may vote in favour of the Acquisition from within any Restricted Jurisdiction if to do so would constitute a violation of the laws and/or regulations of that jurisdiction. Accordingly, unless otherwise determined by Sainsbury's or Home Retail Group plc or required by the Takeover Code, and permitted by applicable law and regulation, copies of this announcement and any formal documentation relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from any Restricted Jurisdiction and persons receiving such documents (including agents, custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in, into or from any Restricted Jurisdiction. Any person (including, without limitation, any custodian, nominee and trustee) who would, or otherwise intends to, or who may have a contractual or legal obligation to, forward this announcement and/or the Scheme Document and/or any other related document to any jurisdiction outside the UK should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdiction. If the Acquisition is implemented by way of a Takeover Offer (unless otherwise permitted by applicable law and regulation), the Takeover Offer may not be made directly or indirectly, in, into or from or by the use of mails or any other means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national state or other securities exchange of any Restricted Jurisdiction and the Takeover Offer may not be capable of acceptance by any such use, means, instrumentality or facilities or from within any Restricted Jurisdiction.

Further details in relation to Home Retail Group Shareholders in overseas jurisdictions will be contained in the Scheme Document.

Note to US holders of Home Retail Group Shares and Home Retail Group ADR Holders

US holders of Home Retail Group Shares and Home Retail Group ADR Holders should note that the Acquisition relates to the securities of a UK company with a listing on the London Stock Exchange and is proposed to be implemented pursuant to a scheme of arrangement provided for under English company law. A transaction effected by means of a scheme of arrangement is not subject to the tender offer rules or the proxy solicitation rules under the US Exchange Act. Accordingly, the Acquisition will be subject to UK procedural and disclosure requirements and practices applicable to a scheme of arrangement involving a target company in England listed on the London Stock Exchange, which are different from the disclosure requirements of the US tender offer and proxy solicitation rules. The financial information included in this announcement and other documentation related to the Acquisition has been or will have been prepared in accordance with International Financial Reporting Standards and thus may not be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the US. If Sainsbury's exercises its right, in the circumstances provided for in this announcement, to implement the Acquisition by way of a Takeover Offer, such Takeover Offer will only be made in the United States if an exemption from the registration requirements of the US Securities Act is available.

The New Sainsbury's Shares to be issued pursuant to the Acquisition have not been registered under the US Securities Act or under any laws or with any securities regulatory authority of any state, district or other jurisdiction, of the United States, and may only be offered or sold in the United States in reliance on an exemption from registration requirements of the US Securities Act including in the case of the proposed scheme of arrangement, Section 3(a)(10) thereunder.

Neither the SEC nor any US state securities commission has approved or disapproved of the New Sainsbury's Shares to be issued in connection with the Acquisition, or determined if this announcement is accurate or complete. Any representation to the contrary is a criminal offence in the United States.

It may be difficult for US holders of Home Retail Group Shares and Home Retail Group ADR Holders to enforce their rights and claims arising out of the US federal securities laws, since Sainsbury's and Home Retail Group plc are located in countries other than the United States, and some or all of their officers and directors may be residents of countries other than the United States. US holders of Home Retail Group Shares and Home Retail Group ADR Holders may not be able to sue a non-US company or its officers or directors in a non-US court for violations of US securities laws. Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's judgement.

Forward-looking statements

This announcement (including information incorporated by reference in this announcement), oral statements made regarding the Acquisition, and other information published by Sainsbury's and Home Retail Group plc contain statements which are, or may be deemed to be, "forward-looking statements". All statements, other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of Sainsbury's and Home Retail Group plc about future events, and are therefore subject to risks and uncertainties which could cause actual results, performance or events to differ materially from those expressed or implied by the forward-looking statements. The forward-looking statements contained in this announcement include statements relating to the expected effects of the Acquisition on the Sainsbury's Group, the Home Retail Group and the Combined Group, the expected timing and scope of the Acquisition and other statements other than historical facts. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plan", "expect", "budget", "target", "aim", "scheduled", "estimate", "forecast", "intend", "anticipate", "assume" or "believe", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Although Sainsbury's and Home Retail Group plc believe that the expectations reflected in such forward-looking statements are reasonable, Sainsbury's and Home Retail Group plc can give no assurance that such expectations will prove to be correct. By their nature, forward-looking statements involve risks (known and unknown) and uncertainties (and other factors that are in many cases beyond the control of Sainsbury's and/or Home Retail Group plc) because they relate to events and depend on circumstances that may or may not occur in the future.

There are a number of factors that could affect the future operations of the Sainsbury's Group, the Home Retail Group and/or the Combined Group and that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include the satisfaction of the Conditions, as well as additional factors, such as: domestic and global business and economic conditions; asset prices; market related risks such as fluctuations in interest rates and exchange rates, industry trends, competition, changes in government and regulation, changes in the policies and actions of governments and/or regulatory authorities (including changes related to capital and tax), changes in political and economic stability, disruption in business operations due to reorganisation activities, interest rate, inflation and currency fluctuations, the timing impact and other uncertainties of future or planned acquisitions or disposals or combinations, the inability of the Combined Group to realise successfully any anticipated synergy benefits when the Acquisition is implemented, the inability of the Sainsbury's Group to integrate successfully the Home Retail Group's operations and programmes when the Acquisition is implemented, the Combined Group incurring and/or experiencing unanticipated costs and/or delays, or difficulties relating to the Acquisition when the Acquisition is implemented. Other unknown or unpredictable factors could affect future operations and/or cause actual results to differ materially from those in the forward-looking statements. Such forward-looking statements should therefore be construed in the light of such factors.

Each forward-looking statement speaks only as of the date of this announcement. Neither Sainsbury's nor Home Retail Group plc, nor any of their respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. All forward-looking statements contained in this announcement are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers are cautioned not to place undue reliance on these forward-looking statements. Other than in accordance with their legal or regulatory obligations (including under the Takeover Code, the Listing Rules and the Disclosure and Transparency Rules of the FCA), neither the Sainsbury's Group nor the Home Retail Group is under or undertakes any obligation, and each of the foregoing expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

No profit forecasts or estimates

Unless expressly stated otherwise, no statement in this announcement (including any statement of estimated synergies) is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per Sainsbury's Share or Home Retail Group Share for the current or future financial years would necessarily match or exceed the historical published earnings per Sainsbury's Share or Home Retail Group Share.

Disclosure requirements of the Takeover Code

Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1 per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the Offer Period and, if later, following the announcement in which any securities exchange offeror is first identified.

An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10^th Business Day following the commencement of the Offer Period and, if appropriate, by no later than 3.30 pm (London time) on the 10^th Business Day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes, interested in 1 per cent. or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the Business Day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the Offer Period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Publication on website and availability of hard copies

A copy of this announcement will be made available, subject to certain restrictions relating to persons resident in or subject to laws and/or regulations of any Restricted Jurisdictions, on the Sainsbury's Group's website at http://www.j-sainsbury.co.uk/investor-centre/disclaimer/ and the Home Retail Group's website at https://www.homeretailgroup.com/investor-centre/sainsburys-offer/ by no later than 12 noon (London time) on the Business Day following this announcement. For the avoidance of doubt, neither the contents of those websites nor the contents of any website accessible from hyperlinks on those websites (or any other websites referred to in this announcement) are incorporated into, or form part of, this announcement.

Sainsbury's Shareholders and Home Retail Group Shareholders may request a hard copy of this announcement by email at [email protected] or in writing at Shareholder Services, 3^rd Floor, J Sainsbury plc, 33 Holborn, London EC1N 2HT (in the case of Sainsbury's Shareholders) or the Company Secretary of Home Retail Group plc in writing at 489-499 Avebury Boulevard, Milton Keynes MK9 2NW or Capita Asset Services in writing at 40 Dukes Place, London EC3A 7NH (in the case of Home Retail Group Shareholders), in each case during business hours. Sainsbury's Shareholders and Home Retail Group Shareholders may also request that all future documents, announcements and information sent to them in relation to the Acquisition be in hard copy form. A hard copy of such document, announcement (including this announcement) or information will not be sent unless so requested.

Information relating to Home Retail Group Shareholders

Please be aware that addresses, electronic addresses and certain other information provided by Home Retail Group Shareholders, persons with information rights and other relevant persons for the receipt of communications from Home Retail Group plc may be provided to Sainsbury's during the Offer Period as required under Section 4 of Appendix 4 of the Takeover Code.

Rounding

Certain figures included in this announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

 

 

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT AND INVESTORS SHOULD NOT MAKE ANY INVESTMENT DECISION IN RELATION TO THE NEW SAINSBURY'S SHARES EXCEPT ON THE BASIS OF INFORMATION IN THE PROSPECTUS AND THE SCHEME DOCUMENT WHICH ARE PROPOSED TO BE PUBLISHED IN DUE COURSE

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

FOR IMMEDIATE RELEASE

1 April 2016

RECOMMENDED FINAL CASH AND SHARE OFFER
for
HOME RETAIL GROUP PLC
by
J SAINSBURY PLC

to be implemented pursuant to a scheme of arrangement

1.         Introduction

Further to the announcement by J Sainsbury plc ("Sainsbury's") on 18 March 2016 (the "Original Announcement") setting out the terms of its cash and share offer for Home Retail Group plc (the "Acquisition"), the Boards of Sainsbury's and Home Retail Group plc are pleased to announce that following further discussions, the Home Retail Group Directors now intend unanimously to recommend the Acquisition.

With the consent of the Panel, the Boards of Sainsbury's and Home Retail Group plc have also agreed to implement the Acquisition pursuant to a court‑sanctioned scheme of arrangement of Home Retail Group plc under Part 26 of the 2006 Act (and the steps contemplated by such scheme as set out in paragraph 18 of this announcement).

This announcement supersedes and replaces the Original Announcement.

2.         The Acquisition

Under the terms of the Acquisition, which will be subject to the Conditions as set out in Appendix 1 to this announcement and to the full terms and conditions which will be set out in the Scheme Document, Home Retail Group Shareholders will be entitled to receive:

For each Home Retail Group Share	0.321 New Sainsbury's Shares
	and
	55 pence in cash
	(the "Offer Consideration")

In addition, Home Retail Group Shareholders will also be entitled to receive the following payments:

·        25 pence per Home Retail Group Share, reflecting the £200 million return to shareholders in respect of the Homebase Sale (the "Homebase Payment"), as announced by Home Retail Group plc on 18 January 2016; and

·        2.8 pence per Home Retail Group Share in lieu of a final dividend in respect of Home Retail Group plc's financial year ended 27 February 2016 (the "Additional Home Retail Group Payment"),

(together, the "Proposed Capital Returns").

Accordingly, the Special Dividend referred to in the Original Announcement will not be paid.

Based on the Closing Price of Sainsbury's Shares of 276.3 pence on 31 March 2016, being the Last Practicable Date:

·        the Offer Consideration represents an indicative value of 143.7 pence per Home Retail Group Share and values Home Retail Group plc's issued ordinary share capital at approximately £1.2 billion;

·        the Offer Consideration and the Proposed Capital Returns together represent an indicative value of 171.5 pence per Home Retail Group Share and value Home Retail Group plc's issued ordinary share capital at approximately £1.4 billion; and

·        the Offer Consideration and the Proposed Capital Returns together represent a premium of approximately 74 per cent. to the Closing Price of 98.7 pence per Home Retail Group Share on 4 January 2016 (being the last Business Day prior to the commencement of the Offer Period).

Upon Completion it is expected that Home Retail Group Shareholders will hold approximately 12 per cent. of the enlarged issued ordinary share capital of Sainsbury's (based on the existing issued ordinary share capital of Sainsbury's and Home Retail Group plc).

The financial terms of the Acquisition (including the Offer Consideration and the Proposed Capital Returns) are final and will not be increased, except that Sainsbury's reserves the right to increase the amount of the Offer Consideration and/or the Proposed Capital Returns if there is an announcement on or after the date hereof of an offer or a possible offer for Home Retail Group plc by a third party offeror or potential offeror.

It is intended that the Scheme, the Proposed Capital Returns and the Acquisition will be implemented by way of a three step process summarised in paragraph 18 of this announcement, pursuant to which Sainsbury's will acquire (indirectly, following the introduction of a new holding company of Home Retail Group plc (the "New TopCo") and the subsequent reduction of capital of New TopCo (the "New TopCo Capital Reduction")) the entire issued and to be issued share capital of Home Retail Group plc.

The Acquisition will be conditional upon, amongst other things: (i) approval by the requisite majorities of Home Retail Group Shareholders at the Home Retail Group Meetings; (ii) regulatory clearances being received from the FCA, the GFSC and the CMA; and (iii) the Scheme and the New TopCo Capital Reduction becoming Effective and all other Conditions being fulfilled or (if capable of waiver) waived by no later than the Long Stop Date.

The Acquisition will include a Mix and Match Facility, which will allow Home Retail Group Shareholders to elect, subject to off-setting elections, to vary the proportions in which they receive New Sainsbury's Shares and cash in respect of their holdings in Home Retail Group Shares. However, the total number of New Sainsbury's Shares to be issued and the maximum aggregate amount of cash to be paid under the Acquisition will not be varied as a result of elections under the Mix and Match Facility. Please refer to paragraph 7 of this announcement for further details.

Subject to any legal or regulatory requirements or restrictions in any Restricted Jurisdictions, Sainsbury's has agreed to arrange a dealing facility for Home Retail Group plc's retail shareholders. Under such dealing facility, the New Sainsbury's Shares to which Home Retail Group plc's retail shareholders become entitled may be sold for their benefit at the standard cost charged by the provider of such facility. Further details of the dealing facility will be included in the Scheme Document.

3.         Background to and reasons for the Acquisition

Sainsbury's set out a clear strategy in November 2014 and outlined its vision to provide great quality products and services at fair prices, delivering these to customers whenever and wherever they want to shop. As part of this, in its core food business, Sainsbury's has invested in product quality, range, pricing and multiple channels to market to ensure that it maintains and grows this critical core business. By lowering prices and reducing the level of promotions, Sainsbury's has simplified its food business, improved its offer to customers and delivered efficiencies which then supports further investment in the core proposition. The Sainsbury's Directors believe Sainsbury's is making good progress particularly versus its "Big Four" supermarket peers, delivering growth in transactions and volumes in a highly competitive marketplace.

Sainsbury's is also focused on realising the benefits from its high level of footfall and customer knowledge to compete across a broad range of products and services, beyond its food heritage. A key part of the strategy is to grow the Sainsbury's clothing and general merchandise business in store and online. Sainsbury's focus for organic growth in this area is on the categories that customers buy frequently and Sainsbury's has prioritised clothing, homewares, toys and seasonal ranges. Sainsbury's has been exploring the optimisation of its retail space to develop its customer offer, including adapting its store space to increase the product range and services that are provided.

Sainsbury's is seeing strong growth in these categories supported by its design-led own label ranges such as Tu and Home Collection. Sainsbury's experience so far from having launched its clothing range online is that there is strong, nationwide demand for these ranges that it is not currently able to provide to all its customers from its store network. Consequently, in its clothing and general merchandise categories, Sainsbury's sees strong growth potential in the long term from being able to provide a full multi-channel proposition, offering Click and Collect and "fast to home" delivery.

In addition to these areas of strong organic growth, Sainsbury's has been working in partnership with the Home Retail Group trialling a number of Argos concessions in Sainsbury's stores. Argos launched ten concessions in Sainsbury's supermarkets which have now been trading for an average of 38 weeks. In addition Sainsbury's has also offered Argos FastTrack Collection services in one small supermarket and two convenience stores since November 2015.

Sainsbury's customer research has shown that both Argos and Sainsbury's customers value having Argos concessions in Sainsbury's stores as they can complete more general merchandise shopping missions at the same time as they do their food and grocery shop; Argos customers have welcomed the additional convenience they get from having the Argos offer in Sainsbury's supermarkets which are easily accessible, have free parking and offer longer opening hours.

Sainsbury's has seen encouraging results from these trials, driving additional customers and sales to both Argos and Sainsbury's across the ten locations. These trials, together with the due diligence conducted in connection with the Acquisition, have enabled Sainsbury's to build up a strong understanding of the Home Retail Group business.

The Acquisition accelerates Sainsbury's strategy

The Sainsbury's Directors believe that the Acquisition represents an attractive opportunity to accelerate Sainsbury's strategy across food, clothing and general merchandise and that the combination of Sainsbury's and Home Retail Group plc is an attractive proposition for the customers and shareholders of both companies, establishing a platform for long-term value creation.

In particular, the Sainsbury's Directors believe that the Acquisition will deliver the following benefits:

Leading food and non-food retailer of choice for customers

·          Both the Sainsbury's and the Home Retail Group brands represent trust, quality, value and service, with strong foundations.

·          The combination will bring together two of the UK's leading retail businesses, with complementary product offers, focused on delivering quality products and services at fair prices, through an integrated, multi-channel proposition.

·          Sainsbury's and the Home Retail Group share similar cultures and values, focused on serving the needs of customers whenever and wherever they want to shop.

Deliver profitable sales growth by offering customers a winning combination of location, range, speed and flexibility

·          The Combined Group will be able to offer customers the right combination of product range, location, speed and flexibility across food, clothing and general merchandise, making each business's core proposition more accessible and convenient for all customers.

·          Argos concessions or collection services in Sainsbury's stores will increase its reach and customer base while at the same time reducing Argos operating costs.

·          Sainsbury's has detailed knowledge of, and direct connection with, its customers who account for around 25 million transactions a week, and the Combined Group will be able to enhance and benefit from this to drive sales and loyalty.

Optimises the use of combined retail space

·          The combination will optimise the use of the combined retail space, by rolling out the Argos proposition via concessions into the Sainsbury's store network, enhancing convenience for customers, increasing the attractiveness of these locations and delivering cost efficiencies.

·          Relocations of existing Argos stores into Sainsbury's supermarkets will be optimised to the extent possible to fall in line with Argos lease expiry dates to minimise costs. Relocations of Argos stores into Sainsbury's supermarkets are expected to make up approximately 55 per cent. of the Argos concessions in Sainsbury's supermarkets.

•           Approximately 50 per cent. of these are expected to move less than one mile and to a similar retail location type. In these relocations, sales are assumed to be the same as are currently seen in the existing Argos store.

•           Where the existing Argos store is relocating into a Sainsbury's supermarket which is more than one mile away or to a different retail location type, the level of sales transferred to the relocated Argos concession is assumed to be lower than that which are currently achieved in the existing Argos store.

•           Existing Argos stores have a short lease length. As of the end of the financial year ended 28 February 2015, over half of Argos leases expire within five years and on average have 4.9 years remaining.

·          Such relocations will have lower fixed operating (e.g. occupancy costs and utilities) and store labour costs when compared to standalone Argos stores:

•           Store level costs, notably store labour, occupancy costs and utilities, which are estimated to be equal to approximately 11-14 per cent. of Argos spoke sales, will be lowered in relocation concessions.

·          Infill Argos concessions (which are expected to make up approximately 45 per cent. of the concession rollout) will be opened within Sainsbury's supermarkets where there is no Argos store within three miles, or in catchments that are underserved by Argos. Infill Argos stores are expected to:

•           deliver additional sales with attractive returns on investment; and

•           create new retail roles to operate these concessions.

·          All Argos concessions in Sainsbury's supermarkets are assumed to gain additional spend from Sainsbury's customers shopping in Argos who do not currently shop in Argos.

·          Argos collection services will be offered in Sainsbury's stores which will drive additional footfall and cross selling opportunities.

·          The Combined Group will have attractively located stores across the UK and Ireland, offering access to a wide range of product categories including food and grocery, clothing, homewares, toys, stationery, electrical goods, furniture and other general merchandise.

Multi-channel capabilities

·          The Home Retail Group is shaping the future of shopping in the UK through digital retail leadership and multi-channel capability. It is a leader in online and mobile retailing and the Sainsbury's Directors believe that a combination of Sainsbury's and Home Retail Group plc will significantly enhance Sainsbury's digital capability in food, clothing and general merchandise.

·          The Acquisition will bring together multi-channel capabilities including digital, store and delivery networks to provide fast, flexible and reliable product fulfilment to store or to home across a wide range of food and non-food products.

·          The Combined Group's performance will be enhanced by its ability to offer customers a wide range of products that meet their everyday needs, available in stores, to Click and Collect or delivered to home at a time that suits the customer.

A financial services proposition with consumer-centric services

·          The Acquisition is expected to create a financial services proposition that will provide a wider range of customer-centric services including credit cards, store credit, loans, deposits, insurance and ATMs.

Deliver revenue and cost synergy potential

·          The Acquisition is expected to deliver revenue synergy potential through the ability to sell to each other's customers, including the operation of Argos concessions within Sainsbury's stores, the sale of Sainsbury's products and services to Argos' customers and leveraging Argos infrastructure.  

·          The Acquisition is expected to provide cost synergy potential through property rationalisation, scale benefits and operational efficiencies, as outlined in paragraph 4 below. Based on the trials undertaken with Argos, Sainsbury's has confidence in the ability of the Acquisition to deliver synergies with limited integration risk, driven by property rationalisation, which is a core Sainsbury's strength.

4.         Financial benefits and effects of the Acquisition

Synergy potential

The Sainsbury's Directors believe that, as a direct result of the Acquisition, the Combined Group will generate attractive synergies and create additional shareholder value.

The Agreed Terms Announcement on 2 February 2016 included statements of estimated cost savings and synergies expected to arise from the Acquisition.

Sainsbury's has been able, as a result of further analysis and its integration planning work following undertaking due diligence on the Home Retail Group, to revise the initial synergy estimate, as set out in the Original Announcement and repeated below (the "Revised Quantified Financial Benefits Statement") ⁽¹⁾. The Sainsbury's Directors believe that these cost savings and synergies further enhance the attractiveness of the Acquisition.

Note:

(1)           References to "Offer" and "HRG" in the Revised Quantified Financial Benefits Statement set out in the Original Announcement have been replaced with "Acquisition" and "Home Retail Group plc" respectively.

"The Sainsbury's Directors now expect a higher level of EBITDA synergies in the third full year after Completion of not less than £160 million. This represents an increase of one third compared to the previous estimate of not less than £120 million EBITDA synergies. This higher EBITDA synergy estimate results from (i) an increase of £15 million in the estimated synergies from Argos concessions due to an increase in the number of concession opportunities and increased occupancy cost savings, offset by a reduction in the estimated Sainsbury's food and grocery halo sales; (ii) an increase of £30 million in the estimated cost synergies from central and support functions savings as well increased buying cost savings; and (iii) a decrease of £5 million in other revenue synergies as a result of revised assumptions on clothing, homewares and seasonal revenue synergies. ⁽²⁾

Note:

(2)           Numbers refer to synergies in the third full year after Completion.

Approximately 15 per cent. of the estimated EBITDA synergies are expected to be realised in the first full year after Completion, approximately 65 per cent. in the second full year after Completion and 100 per cent. in the third full year after Completion.

The constituent elements of quantified synergies, which are in addition to savings previously targeted by Sainsbury's and Home Retail Group plc separately, comprise the following:

·          approximately 45 per cent. of the identified synergies (approximately £75 million) are expected to be generated from Argos concessions, arising from (i) cost savings generated from the relocation of certain existing Argos stores into concessions in Sainsbury's stores, and (ii) revenue gains from new concessions within Sainsbury's stores, including but not limited to cross-selling opportunities and the expansion of Click and Collect desks. Of these synergies, approximately 15 per cent. are expected to be realised in the first full year after Completion, approximately 60 per cent. in the second full year after Completion and 100 per cent. in the third full year after Completion;

·          approximately 45 per cent. of the identified synergies (approximately £70 million) are expected to be cost synergies generated by removing duplication and overlap from both central and support functions at Sainsbury's and Home Retail Group plc. There are also benefits to the Combined Group in purchasing of goods for resale and goods not for resale from sharing best practice and increased scale. Of these synergies, approximately 15 per cent. are expected to be realised in the first full year after Completion, approximately 65 per cent. in the second full year after Completion and 100 per cent. in the third full year after Completion; and

·          the remainder of the identified synergies (approximately £15 million) are expected to be further revenue synergies, principally from the sale of Sainsbury's clothing, homewares and seasonal and leisure ranges through the existing Argos network together with the roll-out of Sainsbury's ATMs to Argos locations and the sale of Habitat products through Sainsbury's channels. Of these synergies, approximately 25 per cent. are expected to be realised in the first full year after Completion, approximately 80 per cent. in the second full year after Completion and 100 per cent. in the third full year after Completion.

It is expected that the realisation of the identified synergies will require one-off exceptional costs of approximately £130 million, of which approximately 50 per cent. are expected to be incurred in the first full year after Completion, 20 per cent. in the second full year after Completion and 30 per cent. in the third full year after Completion.

It is also expected that incremental capital expenditure of approximately £140 million will be incurred in the three years following Completion, relating to store fit-out expenditure. Approximately 30 per cent. of this capital expenditure is to be incurred in the first full year after Completion, 40 per cent. in the second full year after Completion and 30 per cent. in the third full year after Completion.   

The synergies referred to above are expected to be recurring and are expected to arise as a direct result of the Acquisition and could not be achieved independently of the Acquisition. The synergies are also stated net of anticipated dis-synergies, which arise principally from lost sales in the Argos stores moving more than one mile or changing to a different retail location type as well as estimated cannibalisation impact of new infill Argos concessions. For the avoidance of doubt, the EBITDA impact of the synergies as set out above already reflects the impact of these identified dis-synergies."

Please refer to Appendix 4 for further detail on the above Revised Quantified Financial Benefits Statement (including the supporting bases of belief and principal assumptions). References in this announcement to the Revised Quantified Financial Benefits Statement should be read in conjunction with Appendix 4.

The Sainsbury's Directors have confirmed that there have been no material changes to the Revised Quantified Financial Benefits Statement since 18 March 2016 and the Revised Quantified Financial Benefits Statement remains valid. Deloitte, Morgan Stanley and UBS have also confirmed to Sainsbury's that the reports they produced in connection with the Revised Quantified Financial Benefits Statement (copies of which were set out in Appendix 3 to the Original Announcement on 18 March 2016) continue to apply.

Sainsbury's has identified a number of initiatives which are expected to create additional benefits that are not included in the Revised Quantified Financial Benefits Statement, including:

·          utilisation of the Sainsbury's brand, marketing and loyalty database to increase Argos sales;

·          utilisation of Argos systems to manage Sainsbury's general merchandise (and thereby improving availability performance and overall inventory efficiency); and

·          potential synergies within the Argos Financial Services business.

Financial effects

The Sainsbury's Directors expect the Acquisition will result in double digit earnings per share accretion (excluding the effects of implementation costs) and a low to mid teens return on invested capital (inclusive of implementation costs) ⁽³⁾ in the third full year following Completion. ⁽⁴⁾

Notes:

(3)           Return on invested capital is defined as acquired post-tax EBIT plus post-tax synergies divided by purchase price plus implementation costs net of tax.

(4)           These statements are not, and shall not be construed as, profit forecasts.

5.         Recommendation

The Home Retail Group Directors, who have been so advised by Bank of America Merrill Lynch, consider the terms of the Acquisition to be fair and reasonable. In providing its advice to the Home Retail Group Directors, Bank of America Merrill Lynch has taken into account the commercial assessments of the Home Retail Group Directors.

Accordingly, the Home Retail Group Directors intend unanimously to recommend that Home Retail Group Shareholders vote in favour of the Scheme at the Court Meeting and the resolutions relating to the Acquisition to be proposed at the Home Retail Group General Meeting (or if the Acquisition is subsequently structured as a Takeover Offer, accept any Takeover Offer made by Sainsbury's), as the Home Retail Group Directors have irrevocably undertaken to do, or procure, in respect of their own beneficial holdings of Home Retail Group Shares amounting to, in aggregate, 1,990,679 Home Retail Group Shares, representing approximately 0.24 per cent. of the issued ordinary share capital of Home Retail Group plc on the Last Practicable Date.

Further details of these irrevocable undertakings are set out in Appendix 3 to this announcement.

6.         Background to and reasons for the Home Retail Group Directors' recommendation

In October 2012, Argos outlined a five-year Transformation Plan to reinvent itself as a digital retail leader, transforming from a catalogue-led business to a digitally led business. The Transformation Plan addresses competitive challenges, aims to exploit emerging market opportunities and restore sustainable growth. The Homebase Sale, which completed on 27 February 2016, further enables the remaining group to focus on the Transformation Plan.

As stated in Home Retail Group plc's circular dated 2 February 2016 relating to the Homebase Sale, meaningful progress has been made to date on the Transformation Plan, and the Home Retail Group Directors continue to believe that execution of the plan would create a leading digital retailer in the UK and deliver future shareholder value.

For Home Retail Group plc, there will be significant business benefits in the combination with Sainsbury's, including benefits of scale and opportunity to accelerate the work begun under the Transformation Plan, creating opportunities for our employees and other stakeholders. While the Home Retail Group Directors are confident of the future growth prospects of Home Retail Group plc, they believe that the Acquisition provides Home Retail Group Shareholders with a value today which is attractive and reflects the prospects for Home Retail Group plc under the Transformation Plan. In addition, the share component of the Acquisition will enable Home Retail Group Shareholders to benefit from the value creation expected to arise through the combination, including significant synergies.

The Home Retail Group Directors considered the Acquisition in relation to the value and prospects of the underlying business, and the potential medium-term standalone value of Home Retail Group Shares in reaching its conclusion. Accordingly, the Home Retail Group Directors intend unanimously to recommend that Home Retail Group Shareholders vote in favour of the Scheme at the Court Meeting and the resolutions relating to the Scheme and the Acquisition to be proposed at the Home Retail Group General Meeting.

7.         Mix and Match Facility

Home Retail Group Shareholders (other than certain persons in Restricted Jurisdictions) may elect, subject to availability, to vary the proportions in which they receive New Sainsbury's Shares and cash in respect of their holdings in Home Retail Group Shares. However, the total number of New Sainsbury's Shares to be issued and the maximum aggregate amount of cash to be paid under the Acquisition will not be varied as a result of elections under the Mix and Match Facility. Accordingly, satisfaction of elections made by Home Retail Group Shareholders under the Mix and Match Facility will depend on the extent to which other Home Retail Group Shareholders make offsetting elections. 

To the extent that elections cannot be satisfied in full, they will be scaled down on a pro‑rata basis. As a result, Home Retail Group Shareholders who make an election under the Mix and Match Facility will not necessarily know the exact number of New Sainsbury's Shares or the amount of cash they will receive until settlement of the consideration due to them in respect of the Acquisition. The Mix and Match Facility is conditional upon Completion.

Elections under the Mix and Match Facility will not affect the entitlements of those Home Retail Group Shareholders who do not make such elections.

Further details in relation to the Mix and Match Facility will be contained in the Scheme Document and accompanying Form of Election.

8.         Financing of the Acquisition

Sainsbury's intends to finance the cash consideration payable to Home Retail Group Shareholders pursuant to the Acquisition through its existing debt facilities and resources, to be entirely refinanced at a later date through the proposed transfer of the Home Retail Group's Financial Services business to Sainsbury's Bank.  This would have the consequence of lowering the Combined Group's lease adjusted leverage (excluding Sainsbury's Bank) relative to the standalone lease adjusted leverage of the Sainsbury's Group (excluding Sainsbury's Bank).

Sainsbury's entered into an amendment and restatement agreement dated 18 March 2016 (the "Amendment and Restatement Agreement") making certain amendments to the existing facility agreement dated 5 May 2015 between Sainsbury's, Sainsbury's Supermarkets Limited as guarantor, HSBC Bank plc as facility agent, HSBC Corporate Trustee Company (UK) Limited as security agent and the financial institutions listed therein to (i) permit the Acquisition and (ii) allow Sainsbury's to use a proportion of the facilities to finance the cash consideration payable under the Acquisition.

Morgan Stanley and UBS are satisfied that sufficient resources are available to Sainsbury's to satisfy in full the cash consideration payable to Home Retail Group Shareholders pursuant to the terms of the Acquisition.

Further information on the financing of the Acquisition will be set out in the Scheme Document.

9.         Information relating to the Sainsbury's Group

Founded in 1869, as at 12 March 2016 the Sainsbury's Group operated 1,374 stores - including 601 supermarkets and 773 convenience stores, and employed approximately 165,156 colleagues across the UK. With around 25 million customer transactions every week, the Sainsbury's Group's focus is on providing great quality products at fair prices. The Sainsbury's Group sells food, clothing and general merchandise products to customers across supermarkets, convenience stores and online and also sells fuel from petrol filling stations adjacent to some of its stores. Sainsbury's Bank offers accessible financial products such as credit cards, insurance and personal loans that reward customers who both bank and shop with the Sainsbury's Group. Strong, well-established values are integral to the Sainsbury's Group's success in helping customers Live Well for Less.

J Sainsbury plc is the holding company of the Sainsbury's Group. Sainsbury's was listed on the London Stock Exchange in 1973. As at the Last Practicable Date, Sainsbury's had a market capitalisation of £5,317 million.

For the 52-week period ended 14 March 2015, the Sainsbury's Group generated revenue of £23,775 million excluding VAT, including fuel, and delivered underlying profit before tax of £681 million. As at 14 March 2015, the Sainsbury's Group had total assets of £16,537 million.

10.       Information relating to the Home Retail Group

The Home Retail Group consists of one of the most recognised retailing brands in the UK home and general merchandise sector, Argos, supported by its Financial Services business.

The Home Retail Group offers over 57,000 products ⁽⁵⁾ through Argos and operates a nationwide distribution network across multiple distribution centres and 845 stores ⁽⁶⁾. The Home Retail Group offers immediacy and convenience through a multi-channel offer.  Customers can place orders in-store, online, on the phone and through smartphone and tablet apps, with collection either immediately in-store, during a specified delivery slot either that day or a day of their choosing through FastTrack Delivery or at specified delivery times for larger items such as appliances and furniture.

In October 2012, Argos outlined a five-year Transformation Plan to reinvent itself as a digital retail leader, transforming from a catalogue-led business to a digital-led business. According to Home Retail Group plc the Transformation Plan addresses competitive challenges, and aims to exploit emerging market opportunities and restore sustainable growth.

Home Retail Group plc is the holding company of Argos and was listed on the London Stock Exchange in 2006. On 27 February 2016, Home Retail Group plc completed the Homebase Sale.  As at the Last Practicable Date, Home Retail Group plc had a market capitalisation of £1,349 million.

For the 52-week period ended 28 February 2015, the Home Retail Group (excluding Homebase, but without adjustments for centrally held functions which were sold as part of the Homebase Sale) generated revenue of £4,231.1 million and delivered benchmark operating profit of £109.7 million. As at 29 August 2015, on an unaudited pro forma basis, the Home Retail Group (excluding Homebase) had total assets of £3,514.4 million⁽⁷⁾.

Notes:

(5)           Based on Home Retail Group plc's Investor Pack - October 2015.

(6)           Based on Home Retail Group plc's trading statement for the final eight-week trading period for the financial year ended 27 February 2016, published on 10 March 2016.

(7)           Based on the pro forma statement of net assets in Home Retail Group plc's circular dated 2 February 2016.

11.       Current Trading

(a)        Sainsbury's

Q4 financial highlights

On 15 March 2016, Sainsbury's published a trading statement in respect of the final nine-week trading period for the financial year ended 12 March 2016, in which it highlighted the following:

"Positive like-for-like Retail sales growth (excl. fuel) for the first quarter in over two years; total Retail sales for fourth quarter up 1.2 per cent (excl. fuel), up 0.5 per cent (inc. fuel); like-for-like Retail sales for fourth quarter up 0.1 per cent (excl. fuel), down 0.4 per cent (inc. fuel); supermarkets delivering like-for-like transaction and volume growth; and a commitment to phase out vast majority of multi-buy promotions across grocery products."

"We have delivered a strong performance this quarter. Our supermarkets recorded both like-for-like transaction and volume growth and we continue to exceed our internal metrics for service and availability. We also maintained our market share in the quarter. The market will remain competitive as food deflation continues to impact sales growth.

We are progressing well with our quality investment in 3,000 own-brand products. The New Year is traditionally a time when customers focus on healthy eating and to cater for this demand we launched a number of vegetable-based product innovations including boodles (butternut squash noodles) and courgetti (spiralized courgette) which are proving extremely popular with our customers. We also introduced new lines to our healthier bread range including the rye loaf and sprouting grain boule, both of which are high in fibre.

Our promotional participation levels continue to reduce year-on-year, running at an average of 28 per cent for the quarter. Customers have told us that multi-buy promotions do not meet their shopping needs today. They are often viewed as confusing, create storage challenges and unnecessary waste. In response to this, we recently announced that we will be phasing out the vast majority of our multi-buy promotions across grocery products by August this year. We will continue to simplify our trading strategy in favour of lower regular prices. We are also committed to reducing waste and in January we launched our Waste less, Save more initiative in Swadlincote, Derbyshire. The town will receive £1 million to trial the latest technology and innovations in reducing household waste.

Our in-store operational metrics for service and availability remain excellent and are beating our internal targets. Year-to-date we have won 16 Grocer 33 Service & Availability awards, ahead of our run-rate in the previous year. We opened 16 convenience stores including our second micro store in Richmond. Groceries online sales grew at nearly 14 per cent and orders by nearly 19 per cent. We simplified our online nectar redemption process, making it easier for customers to redeem their points, and improving the online customer experience.

Clothing delivered over ten per cent growth and we introduced our 22^nd Gok Wan collection which had its best ever February launch. Entertainment also performed well, with nearly 11 per cent growth driven by some big releases in the quarter. Sainsbury's Bank continued its good performance with 15 per cent volume growth in Insurance new business and 12 per cent growth in Travel Money in-store transaction volumes.

We have traded well this year and are making excellent progress implementing our strategy. The market will remain competitive but we are confident that we will continue to outperform our major peers."

Sainsbury's Group Profit Estimate

The Sainsbury's Group made a statement at the time of its second quarter trading statement for the 16 weeks to 26 September 2015, announced on 30 September 2015, that should current market trends continue, it expected its full year (that is, for the 52 weeks ended 12 March 2016) underlying profit before tax (defined as profit before tax before any profit or loss on the disposal of properties, investment property fair value movements, retailing financing fair value movements, IAS 19 pension financing element and defined benefit pension scheme expenses, acquisition adjustments and one-off items that are material and infrequent in nature, but after the coupons on the perpetual subordinated capital securities and perpetual subordinated convertible bonds) ("UPBT") to be moderately ahead of its published consensus profit (which, at the time of such announcement, was £548 million) (the "Sainsbury's Group Profit Estimate"). The Sainsbury's Directors have considered the Sainsbury's Group Profit Estimate and confirm that it remains valid as at the date of this announcement.

The above statement constitutes a profit estimate for the purposes of Rule 28 of the Takeover Code.

Pursuant to Rule 28.1(c) of the Takeover Code, the Sainsbury's Group Profit Estimate is set out in full in Part A of Appendix 5 to this announcement, together with the basis of preparation and confirmations by the Sainsbury's Directors.

(b)        Home Retail Group plc

Q4 financial highlights

On 10 March 2016, Home Retail Group plc published a trading statement in respect of the final eight-week trading period for the financial year ended 27 February 2016 (the "Home Retail Group Q4 Trading Statement"), an extract of which is set out below:

"Total sales at Argos increased by 1.9% to £515m. Net new space contributed 3.0%, principally as a result of the 94 digital concessions and collection points opened within the past year. The store estate has increased by a net 90 stores to 845 in the year. Like-for-like sales declined by 1.1% in the period, however the cannibalisation impact on like-for-like sales as a result of the additional new space was around 1% and therefore underlying like-for-like sales were broadly flat in the period.

Sales of non-electrical product categories grew during the period, principally attributable to the performance of furniture and general sports, partially offset by a decline in jewellery. However, sales of electrical products declined during the period, principally driven by video gaming, tablets and white goods, while mobiles continued to deliver good levels of growth.

Internet sales grew by 13% in the period and represented 51% of total Argos sales, up from 46% for the same period last year. Within this, mobile commerce sales grew by 15% to represent 28% of total Argos sales, up from 25% in the prior year.

Argos' gross margin was up approximately 75 basis points."

Home Retail Group Profit Estimate

In the Home Retail Group Q4 Trading Statement, Home Retail Group plc stated that it expects that Home Retail Group Benchmark Profit before Tax for the financial year ended 27 February 2016 will be in line with the current consensus of market expectations of £93 million (the "Home Retail Group Profit Estimate"). The Home Retail Group Directors have considered the Home Retail Group Profit Estimate and confirm that it remains valid as at the date of this announcement.

The above statement constitutes a profit estimate for the purposes of Rule 28 of the Takeover Code.

The Panel Executive has granted a dispensation from the requirement for Home Retail Group plc to publish reports as required by Rules 28.1(a)(i) and (ii), pursuant to Note 2(b) on Rule 28.1 of the Takeover Code.  As required by Note 2(b) on Rule 28.1 of the Code, the Home Retail Group Profit Estimate is set out in full in Part B of Appendix 5 to this announcement, together with the basis of preparation and confirmations by the Home Retail Group Directors.

12.       Management, employees and locations

Both the Sainsbury's Group and the Home Retail Group have large numbers of committed and talented colleagues who work hard to ensure that customers receive the best possible levels of customer service and quality. The Sainsbury's Board recognises how important such colleagues are to the success of the Combined Group.

The Home Retail Group's scale, multi-channel expertise and competency across a broad range of general merchandise product markets as well as its consumer financial services is highly complementary to Sainsbury's non food expertise in clothing and general merchandise. Sainsbury's therefore anticipates that the future leadership team will be comprised of senior leaders from both the Home Retail Group and the Sainsbury's Group, with a view to retaining the Home Retail Group's expertise in digital, channels, product markets and financial services. The leadership team will be determined in due course and in consultation with the Home Retail Group's senior leadership.

In order to achieve some of the expected benefits of the combination of the Sainsbury's Group and the Home Retail Group, it will be necessary to perform a detailed review of how best to combine the two groups.  The synergy work carried out to date has confirmed the potential to generate cost savings for the Combined Group in areas such as reducing headcount in overlapping corporate and support functions where there may be duplication. However, at this stage Sainsbury's has not yet fully developed proposals as to how such headcount reductions will be implemented.

Integration planning has begun but more detailed consideration will need to be undertaken and will be subject to engagement and (if applicable) consultation with appropriate stakeholders, including employee representative bodies and unions in accordance with Sainsbury's legal obligations. Sainsbury's intends that there will be a dedicated team responsible for leading the integration and that this team will be made up of individuals from both the Home Retail Group and the Sainsbury's Group.

Sainsbury's confirms that the existing contractual and statutory employment rights, including pension rights, of all employees of the Sainsbury's Group and the Home Retail Group will be fully observed following Completion. Further information in respect of employees and pensions will be set out in the Scheme Document.

It is expected that the non-executive directors of Home Retail Group plc will resign from office following Completion and their appointment as Home Retail Group Directors will end in accordance with the terms of their appointment letters.

No proposals have yet been made on the terms of any incentivisation arrangements for relevant employees or managers.

13.       Pension arrangements

Sainsbury's and the trustee of the Home Retail Group Pension Scheme (the "Home Retail Group Trustee") have reached an agreement in relation to the future funding of the Home Retail Group Pension Scheme, the terms of which will take effect conditional on Completion. The key terms are:

·          An agreed basis for the statutory valuation in relation to the Home Retail Group Pension Scheme as at 31 March 2015; an increase in the level of deficit contributions payable by Argos under the Home Retail Group Pension Scheme's statutory schedule of contributions (to £40 million per annum, payable quarterly); and a lump sum payment of £50 million, to be made following Completion. (These contributions are in addition to the lump sum contributions totalling £50 million agreed by Home Retail Group plc with the Home Retail Group Trustee in connection with the Homebase Sale, £26 million of which has already been paid to the Home Retail Group Pension Scheme.)

·          A commitment from Sainsbury's to stand behind Argos' obligations under the statutory schedule of contributions and to make a lump sum payment to the Home Retail Group Pension Scheme (of up to £470 million) if there is an insolvency of Sainsbury's or Argos. This commitment will replace similar commitments currently in place from Home Retail Group plc (which will fall away on Completion) and, subject to certain conditions, will be reset at the next two statutory valuations in relation to the scheme (expected to have effective dates in 2018 and 2021). 

·          The grant of an additional £37.5 million of security over freehold assets in favour of the Home Retail Group Trustee (resulting in £75 million in total, inclusive of the £37.5 million of security agreed with Home Retail Group plc in the connection with the Homebase Sale).

Sainsbury's understands that the Home Retail Group Pension Scheme is closed to the future accrual of benefits. Sainsbury's has no intention to re-open the scheme to benefit accrual or new entrants.

The Home Retail Group Trustee has confirmed to Sainsbury's in writing that, having taken advice, it is satisfied that it does not consider the Acquisition, on the terms described herein, to be materially detrimental to the financial support in place for the Home Retail Group Pension Scheme.

14.       Offer‑related arrangements

(a)         Confidentiality Agreement

Sainsbury's and Home Retail Group plc have entered into a confidentiality agreement dated 3 February 2016 pursuant to which each of Sainsbury's and Home Retail Group plc has undertaken to keep certain information relating to the other party confidential and not to disclose such information to third parties, except to certain permitted disclosees for the purposes of evaluating the Acquisition, the pension trustees of Sainsbury's and Home Retail Group plc, or if required by applicable laws or regulations.

The confidentiality obligations of each party under the Confidentiality Agreement will terminate on Completion or, in the event that the Acquisition is not Completed, the date that is six months after the Acquisition terminates (or, if Sainsbury's exercises the right to implement the Acquisition by way of a Takeover Offer, the Takeover Offer lapses or is withdrawn).

(b)        Co-operation Agreement

Sainsbury's and Home Retail Group plc have entered into a co-operation agreement dated 1 April 2016 with respect to the implementation of the Acquisition.

Sainsbury's and Home Retail Group plc have agreed to co-operate and provide each other with reasonable information, assistance and access in relation to the filings, submissions and notifications to be made for the process of obtaining all regulatory clearances. Sainsbury's and Home Retail Group plc have also agreed to provide each other with reasonable information, assistance and access for the preparation of the key shareholder documentation.

The Co-operation Agreement records Sainsbury's and Home Retail Group plc's intention to implement the Acquisition pursuant to the Scheme. However, Sainsbury's may implement the Acquisition by way of a Takeover Offer if: (i) Home Retail Group plc's consents; (ii) a third party announces a possible offer or firm intention to make an offer for Home Retail Group plc; or (iii) the Board of Home Retail Group plc withdraws or modifies its unanimous recommendation of (or intention to recommend) the Acquisition.

Sainsbury's is subject to certain customary restrictions on the conduct of its business during the period pending Completion, and which prohibit, among other things: (i) the payment by Sainsbury's of dividends (other than in the ordinary course and consistent with past practice and its dividend policy) and (ii) the allotment of further shares (or rights or options in respect of shares) (other than pursuant to employee share incentive plans, or in order to satisfy options or awards vesting under those plans).

The Co-operation Agreement also contains provisions that will apply in respect of Home Retail Group Employee Share Plans and certain other arrangements for the benefit of employees (see paragraph 15 below).

The Co-operation Agreement will terminate if (amongst other circumstances):

(i)      agreed in writing by Sainsbury's and Home Retail Group plc;

(ii)      the Acquisition has not Completed prior to the Long Stop Date; or

(iii)     upon service of written notice by Sainsbury's to Home Retail Group plc, if: (a) the Scheme Document does not include a unanimous and unconditional recommendation of the Acquisition, or the Home Retail Group Directors otherwise withdraw or modify their recommendation; (b) a third party announces a firm intention to make an offer for Home Retail Group plc which is recommended by the Home Retail Group Directors, or which completes; (c) either the Court Meeting or Home Retail Group General Meeting is not held by the 22nd day after the expected date of such meetings as set out in the Scheme Document (or such later date as may be agreed between Sainsbury's and Home Retail Group plc); (d) the Scheme is not approved by the Home Retail Group Shareholders at the Court Meeting or the Home Retail Group General Meeting; (e) the Court hearing to confirm the New TopCo Capital Reduction is not held within three Business Days of the Court hearing to sanction the Scheme (or such later date as may be agreed between Sainsbury's and Home Retail Group plc); or (f) any Condition (which has not been waived) is invoked (with permission of the Panel) so as to cause the Acquisition not to proceed.

15.       Home Retail Group Employee Share Plans and remuneration

Sainsbury's will make appropriate proposals to participants in the Home Retail Group Employee Share Plans in due course. Participants in the Home Retail Group Employee Share Plans will be contacted separately regarding the effect of the Acquisition on their rights under the Home Retail Group Employee Share Plans and with the details of Sainsbury's appropriate proposals. In summary, awards will vest and options, which are not already exercisable, will become exercisable at the time of the Scheme Court Order and participants will have the opportunity to take part in the Scheme on the same basis as other Home Retail Group Shareholders. Holders of tax-qualifying options will be given the opportunity to exchange their options over Home Retail Group Shares for equivalent options over Sainsbury's Shares as an alternative to exercising their options at or up to six months after the time of the Scheme Court Order. Further details of the terms of such proposals will be included in the Scheme Document.

The Acquisition will extend to any Home Retail Group Shares which are unconditionally allotted, issued or transferred, on or prior to the Scheme Record Time to satisfy the exercise of existing options or vesting of awards under the Home Retail Group Employee Share Plans prior to the Scheme Record Time. Any Home Retail Group Shares allotted, issued or transferred after the Scheme Effective Date under the Home Retail Group Employee Share Plans will, subject to the Scheme becoming Effective, be transferred to Sainsbury's (or its nominee) in exchange for the same consideration as Home Retail Group Shareholders will be entitled to receive under the terms of the Acquisition.

The participants in the Home Retail Group Share Incentive Plan will be treated in the same way as the other Home Retail Group Shareholders.

Home Retail Group employees will be eligible to be considered for participation in Sainsbury's employee share plans from Completion.

Home Retail Group Employee Share Plans and other remuneration arrangements will operate in the ordinary course up to Completion. Further, the Home Retail Group will operate a part year discretionary bonus plan for the Home Retail Group employees for the part of the financial year of Home Retail Group plc up to Completion.

16.       Dividends and dividend policy

The Sainsbury's Directors expect that, following Completion, the Combined Group will pay dividends in line with Sainsbury's existing dividend policy of two times cover.

The Boards of Sainsbury's and Home Retail Group plc have agreed that, if the Acquisition has not Completed by the Sainsbury's Interim Dividend Record Time (and provided that Home Retail Group plc has not paid, declared, approved or made any dividend or distribution since the date of the Original Announcement), Home Retail Group Shareholders will be entitled to receive an interim dividend from Home Retail Group plc for the 26 weeks ending 27 August 2016 in an aggregate amount of not more than one pence per Home Retail Group Share (the "Permitted Home Retail Group plc Interim Dividend"), equivalent to the Home Retail Group plc interim dividend in respect of its financial year ended 27 February 2016.

17.       Disclosure of interests in Home Retail Group

Sainsbury's made a public Opening Position Disclosure in respect of the interests in the relevant securities of Home Retail Group plc held by Sainsbury's and its concert parties on 19 January 2016 (the "Sainsbury's Opening Position Disclosure"). As set out in the Sainsbury's Opening Position Disclosure, a close relative of David Tyler, the Chairman of Sainsbury's, holds 355 Home Retail Group Shares.

Save as disclosed in this announcement and in the Sainsbury's Opening Position Disclosure, as at 30 March 2016, none of Sainsbury's nor, so far as Sainsbury's is aware, any person acting or deemed to be acting in concert with Sainsbury's had:

(a)        any interest in, or right to subscribe for, any relevant securities of Home Retail Group plc;

(b)        any short position in (whether conditional or absolute  and whether in the money or otherwise), including any short position under a derivative, any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery of, any relevant securities of Home Retail Group plc; or

(c)        borrowed or lent, or entered into any financial collateral arrangements or dealing arrangements in respect of, any relevant securities of Home Retail Group plc.

18.       Structure of the Scheme, the Proposed Capital Returns and the Acquisition

It is intended that the Scheme, the Proposed Capital Returns and the Acquisition will be implemented by way of a three step process summarised below, pursuant to which Sainsbury's will acquire (indirectly, following the introduction of a new holding company of Home Retail Group plc (the "New TopCo") and the subsequent reduction of capital of New TopCo (the "New TopCo Capital Reduction")) the entire issued and to be issued share capital of Home Retail Group plc.

·     Step 1: Introduction of New TopCo

Under the terms of the Scheme, the Scheme Shares will be cancelled in consideration for which the Scheme Shareholders will receive newly issued shares in New TopCo ("New TopCo Shares") and New TopCo will thereby become the sole shareholder of Home Retail Group plc.

To become Effective, the Scheme requires, among other things, the approval of a majority in number of the relevant Home Retail Group Shareholders present and voting in person or by proxy at the Court Meeting, representing not less than 75 per cent. in value of the Scheme Shares voted by such Home Retail Group Shareholders and the passing of the resolutions necessary to implement the Scheme and the Acquisition at the Home Retail Group General Meeting. The Scheme must also be sanctioned by the Court.

Once the necessary approvals from Home Retail Group Shareholders have been obtained and the other Conditions (other than Condition 1(a) in relation to the Long Stop Date,  Condition 1(c) in relation to the New TopCo Capital Reduction and, if Condition 1(d) in relation to Admission of New Sainsbury's Shares has not yet been satisfied, Condition 1(d)) have been satisfied or (where applicable) waived and the Scheme has been sanctioned by the Court, the Scheme will become Effective upon delivery of the Scheme Court Order to the Registrar of Companies. 

Upon the Scheme becoming Effective, it will be binding on all Home Retail Group Shareholders, irrespective of whether or not they attended or voted at the Home Retail Group Meetings.

The Scheme will be governed by English law. The Scheme will be subject to the applicable requirements of the Takeover Code, the Panel, the London Stock Exchange and the FCA.

·      Step 2: New TopCo Capital Reduction

Following the Scheme becoming Effective, New TopCo's share capital will be reduced through a Court procedure (the "New TopCo Capital Reduction") following which the Proposed Capital Returns will be paid to New TopCo Shareholders (i.e. former Home Retail Group Shareholders).

To become Effective, the New TopCo Capital Reduction must be confirmed by the Court.

·     Step 3: transfer of New TopCo Shares to Sainsbury's

Immediately following the New TopCo Capital Reduction becoming Effective, all of the New TopCo Shares will be transferred to Sainsbury's pursuant to the mandatory transfer provisions in the articles of association of New TopCo, in consideration for the Offer Consideration.

Further details on the steps and structure of the Scheme and the New TopCo Capital Reduction will be set out in the Scheme Document. The Panel has consented to Home Retail Group plc posting the Scheme Document more than 28 days after this announcement.  

Sainsbury's reserves the right to implement the Acquisition by way of a transfer scheme under Part 26 of the 2006 Act or through different steps and processes (with agreement of Home Retail Group plc and, if required, the Panel).

Subject to the satisfaction or waiver of the Conditions, the Acquisition is expected to Complete in the third quarter of 2016.

19.       Conditions

The Acquisition will be subject to the Conditions and certain further terms as set out in Appendix 1 to this announcement and to the full terms and conditions which will be set out in the Scheme Document. The Conditions include, amongst other things: (i) approval by a majority in number of Home Retail Group Shareholders who are on the register of members of Home Retail Group plc at the Voting Record Time, present and voting, whether in person or by proxy, at the Court Meeting and at any separate class meeting which may be required (or any adjournment thereof), and who represent not less than 75 per cent. in value of the Home Retail Group Shares voted by such Home Retail Group Shareholders; (ii) the passing of all resolutions required to approve and implement the Scheme and the Acquisition and to approve certain related matters by the requisite majority of Home Retail Group Shareholders at the Home Retail Group General Meeting (or any adjournment thereof); (iii) regulatory clearances being received from the FCA, the GFSC and the CMA; and (iv) the Scheme and the New TopCo Capital Reduction becoming Effective and all other Conditions being fulfilled or (if capable of waiver) waived by no later than the Long Stop Date. If the Conditions have not been satisfied or waived by the Long Stop Date, or such later date as Sainsbury's and Home Retail Group plc may agree and (if required) the Panel and the Court allow, the Acquisition will not proceed.

20.       Delisting and cancellation of trading

It is intended that dealings in Home Retail Group Shares will be suspended at 5.00 p.m. London time on the date of the Court hearing to sanction the Scheme. It is further intended that an application will be made to the London Stock Exchange for the cancellation of the trading of Home Retail Group Shares on its main market for listed securities and the UKLA will be requested to cancel the listing of Home Retail Group Shares on the premium segment of the Official List to take effect on or shortly after the Scheme Effective Date.

Share certificates in respect of the Home Retail Group Shares will cease to be valid and should be destroyed following the Scheme Effective Date. In addition entitlements to Home Retail Group Shares held within the CREST system will be cancelled.

As soon as reasonably practicable after the Completion Date, it is intended that Home Retail Group plc will be re-registered as a private limited company under the relevant provisions of the 2006 Act.

21.       Prospectus

Sainsbury's will be required to produce the Prospectus in connection with the issue of the New Sainsbury's Shares. The Prospectus will contain information relating to the Sainsbury's Group, the Home Retail Group and the New Sainsbury's Shares. The Prospectus will be published at or around the same time as the Scheme Document is posted to Home Retail Group Shareholders.

22.       Admission to the Official List and to trading on the London Stock Exchange and dealings in New Sainsbury's Shares

Application will be made to the FCA and the London Stock Exchange for the New Sainsbury's Shares to be admitted to the premium segment of the Official List and to trading on the London Stock Exchange's main market for listed securities, respectively.  It is expected that Admission will become effective and that dealings for normal settlement in the New Sainsbury's Shares will commence on the London Stock Exchange at 8.00 a.m. on the first Business Day following the Completion Date.

23.       Fractional entitlements

Fractions of New Sainsbury's Shares will not be allotted or issued to Home Retail Group Shareholders and entitlements will be rounded down to the nearest whole number of New Sainsbury's Shares and all fractions of New Sainsbury's Shares will be aggregated and sold in the market as soon as practicable after the Completion Date. The net proceeds of such sale (after deduction of all expenses and commissions incurred in connection with the sale) will be distributed in due proportions to Home Retail Group Shareholders who would otherwise have been entitled to such fractions, save that individual entitlements to amounts of less than £5 will be retained for the benefit of the Combined Group.

24.       Dealing facility

Subject to any legal or regulatory requirements or restrictions in any Restricted Jurisdictions, Sainsbury's has agreed to arrange a dealing facility for Home Retail Group plc's retail shareholders. Under such dealing facility, the New Sainsbury's Shares to which Home Retail Group plc's retail shareholders become entitled may be sold for their benefit at the standard cost charged by the provider of such facility. Further details of the dealing facility will be included in the Scheme Document.

25.       Documents on website and availability of hard copies

Copies of the following documents required to be published pursuant to Rule 26.2 of the Takeover Code will be published on Sainsbury's website at http://www.j-sainsbury.co.uk/investor-centre/disclaimer/ and on the Home Retail Group's website at https://www.homeretailgroup.com/investor-centre/sainsburys-offer/ by no later than noon (London time) on the Business Day following this announcement:

(a)        this announcement;

(b)        the Co-operation Agreement; and

(c)        the irrevocable undertakings listed in Appendix 3.

In addition, copies of the following documents required to be published pursuant to Rule 26.2 of the Takeover Code have been made available on Sainsbury's website at http://www.j-sainsbury.co.uk/investor-centre/disclaimer/ and on the Home Retail Group's website at https://www.homeretailgroup.com/investor-centre/sainsburys-offer/:

(d)        the Original Announcement;

(e)        the Confidentiality Agreement; and

(f)         the Amendment and Restatement Agreement.

26.       Overseas shareholders

The release, publication or distribution of this announcement in or into jurisdictions other than the UK and the availability of the Acquisition to Home Retail Group Shareholders who are not resident in the UK or who are subject to the laws and/or regulations of another jurisdiction (including the ability of such Home Retail Group Shareholders to vote their Home Retail Group Shares with respect to the Acquisition at the Home Retail Group Meetings, or to execute and deliver Forms of Proxy appointing another to vote at the Home Retail Group Meetings on their behalf) may be restricted by the laws and/or regulations of those jurisdictions. Therefore any persons who are not resident in the UK or who are subject to the laws and/or regulations of any jurisdiction other than the UK should inform themselves about, and observe, any applicable legal or regulatory requirements. Home Retail Group Shareholders who are in any doubt regarding such matters should consult an appropriate independent professional adviser in the relevant jurisdiction without delay.

27.       Reserving the right to proceed by way of a Takeover Offer

Sainsbury's reserves the right to implement the Acquisition by way of a Takeover Offer for the entire issued and to be issued share capital of Home Retail Group plc not already held by Sainsbury's as an alternative to the Scheme (with the consent of the Panel and subject to the terms of the Co-operation Agreement). In such an event, the Takeover Offer will be implemented on substantially the same terms as set out in the Original Announcement, including an acceptance condition of 90 per cent. of the shares to which such Takeover Offer relates (or such lesser percentage (being more than 50 per cent.) as Sainsbury's may decide with the consent of the Panel), and the Proposed Capital Returns being structured as a Special Dividend.

28.       General

The Home Retail Group Shares and the New TopCo Shares will be acquired pursuant to the Acquisition with full title guarantee, fully paid and free from all liens, charges, equities, encumbrances, rights of pre‑emption and any other interests of any nature whatsoever and together with all rights now or hereafter attaching thereto, including without limitation voting rights and the right to receive and retain in full all dividends and other distributions (if any) declared, made or paid on or after the date of the Original Announcement, other than, in the case of New TopCo Shares, the Proposed Capital Returns.

If any dividend or other distribution is announced, declared, made, paid or becomes payable by Home Retail Group plc or New TopCo in respect of the Home Retail Group Shares or the New TopCo Shares on or after the date of the Original Announcement and prior to the Completion Date, other than or in excess of the Permitted Home Retail Group Payments, Sainsbury's reserves the right to reduce the value of the Offer Consideration (including, for the avoidance of doubt, by reducing the cash element of the Offer Consideration and/or adjusting the Exchange Ratio) by the amount of all or part of the dividend or other distribution, or all or part of the amount in excess of the Permitted Home Retail Group Payments, that has been announced, declared, made, paid or become payable. In calculating the amount of any such reduction, the value of New Sainsbury's Shares will be calculated by reference to the Closing Price of Sainsbury's Shares on the last trading day before Sainsbury's announcement of a reduction in the Offer Consideration.

The New Sainsbury's Shares will be issued credited as fully paid and will rank pari passu in all respects with the Existing Sainsbury's Shares from the date of issue, save that they will not participate in any dividend payable by Sainsbury's with reference to a record date prior to the Completion Date.

This announcement is not intended and does not constitute, or form part of, any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to the Acquisition or otherwise. The New Sainsbury's Shares are not being offered to the public by means of this announcement. Home Retail Group Shareholders are advised to read carefully the Prospectus, the Scheme Document and the Form of Proxy once these have been despatched. Any vote in respect of the resolutions to be proposed at the Home Retail Group Meetings to approve the Scheme, the Acquisition and related matters should be made only on the basis of the information contained in the Scheme Document and the Prospectus.

The New Sainsbury's Shares to be issued pursuant to the Acquisition have not been, and will not be, listed on any stock exchange other than the London Stock Exchange and have not been, and will not be, registered under the US Securities Act or under any laws or with any securities regulatory authority of any state, district or other jurisdiction, of the United States, nor have clearances been, nor will they be, obtained from the securities commission or similar authority of any province or territory of Canada and no prospectus has been, or will be, filed, or registration made, under any securities law of any province or territory of Canada, nor has a prospectus in relation to the New Sainsbury's Shares been, nor will one be, lodged with, or registered by, the Australian Securities and Investments Commission, nor have any steps been taken, nor will any steps be taken, to enable the New Sainsbury's Shares to be offered in compliance with applicable securities laws of Japan and no regulatory clearances in respect of the New Sainsbury's Shares have been, or will be, applied for in any other jurisdiction. Accordingly, unless an exemption under relevant securities laws is available, the New Sainsbury's Shares are not being, and may not be, offered, sold, resold, delivered or distributed, directly or indirectly, in, into or from the United States or any Restricted Jurisdiction or any resident of any Restricted Jurisdiction. The New Sainsbury's Shares to be issued pursuant to the Acquisition are expected to be issued pursuant to the exemption from registration provided by Section 3(a)(10) under the US Securities Act. Neither the SEC nor any US state securities commission has approved or disapproved of the New Sainsbury's Shares, or determined if this announcement is accurate or complete. Any representation to the contrary is a criminal offence.

Morgan Stanley, UBS and Bank of America Merrill Lynch have each given and not withdrawn their consent to the publication of this announcement with the inclusion herein of the references to their names in the form and context in which they appear.

Morgan Stanley and UBS are acting as financial advisers to Sainsbury's for the purposes of the Acquisition. Clifford Chance LLP is acting as legal adviser to Sainsbury's. Deloitte is acting as reporting accountants to Sainsbury's.

Bank of America Merrill Lynch is acting as financial adviser to Home Retail Group plc. Linklaters LLP is acting as legal adviser to Home Retail Group plc.

The Acquisition will be subject to the Conditions and other terms as set out herein and in Appendix 1 to this announcement, and to the full terms and conditions which will be set out in the Scheme Document.  The Scheme Document will also contain notices of the Court Meeting and the Home Retail Group General Meeting and the expected timetable. The Panel has consented to Home Retail Group plc posting the Scheme Document more than 28 days after this announcement. It is expected that the Prospectus, containing further information in relation to the New Sainsbury's Shares, will be published by Sainsbury's at or around the same time as the Scheme Document.

Enquiries

Sainsbury's

Duncan Cooper, Investor Relations                                            Tel: +44 (0) 20 7695 0080

Louise Evans/Anna Harland, Media Relations                             Tel: +44 (0) 20 7695 7295

 

Morgan Stanley (Financial Adviser to Sainsbury's)

Paul Baker                                                                                Tel: +44 (0) 20 7425 8000

Ian Hart

Nick Bishop

 

UBS (Financial Adviser to Sainsbury's)

Hew Glyn Davies                                                                      Tel: +44 (0) 20 7567 8000

Anna Richardson Brown

 

Brunswick (PR Adviser to Sainsbury's)

Katie Ioanilli/Mike Smith                                                            Tel: +44 (0) 20 7404 5959

 

Home Retail Group plc

Richard Ashton, Finance Director                                                Tel: +44 (0)1908 600 291

Mark Willis, Director of Investor Relations                                                                         

 

Bank of America Merrill Lynch (Financial Adviser to Home Retail Group plc)

Jonathan Bewes                                                                         Tel: +44 (0) 20 7628 1000

Eamon Brabazon

Geoff Iles

Luke McMullan

 

Finsbury (PR Adviser to Home Retail Group plc)

Rollo Head                                                                                Tel: +44 (0) 20 7251 3801

 

Further information

This announcement is for information purposes only. It is not intended to and does not constitute, or form part of, any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to the Acquisition or otherwise, nor shall there be any sale, issuance or transfer of securities of Sainsbury's or Home Retail Group plc pursuant to the Acquisition or otherwise in any jurisdiction in contravention of applicable law. The Acquisition will be implemented by means of the Scheme Document (or, in the event that the Acquisition is to be implemented by means of a Takeover Offer, the Offer Document), which will contain the full terms and conditions of the Acquisition, including details of how to vote in respect of the Acquisition.

Sainsbury's will prepare and publish the Prospectus containing information about the New Sainsbury's Shares. Sainsbury's urges Home Retail Group Shareholders to read the Scheme Document and the Prospectus carefully when they become available because they will contain important information in relation to the Acquisition and the New Sainsbury's Shares. Any decision or vote in respect of the Acquisition should be made only on the basis of the information contained in the Scheme Document (or, in the event that the Acquisition is to be implemented by means of a Takeover Offer, the Offer Document) and the Prospectus.

This announcement is an advertisement and does not constitute a prospectus or prospectus equivalent document.

Important notices relating to financial advisers

Morgan Stanley & Co. International plc ("Morgan Stanley"), which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting as financial adviser to Sainsbury's and no-one else in connection with the Acquisition or any other matter referred to herein. In connection with such matters, Morgan Stanley, its affiliates and their respective directors, officers, employees and agents will not regard anyone other than Sainsbury's as their client, nor will they be responsible to any other person for providing the protections afforded to their clients or for providing advice in relation to the Acquisition, the contents of this announcement or any other matter referred to herein.

UBS Limited ("UBS") which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the UK is acting as joint financial adviser to Sainsbury's and no one else in connection with the matters set out in this announcement. In connection with such matters, UBS, its affiliates, and its or their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to anyone other than Sainsbury's for providing the protections afforded to their clients or for providing advice in relation to the contents of this announcement or any other matter referred to herein.

Merrill Lynch International ("Bank of America Merrill Lynch"), a subsidiary of Bank of America Corporation, is acting exclusively for Home Retail Group plc in connection with the matters set out in this announcement and for no one else and will not be responsible to anyone other than Home Retail Group plc for providing the protections afforded to its clients or for providing advice in relation to the matters set out in this announcement.

Overseas jurisdictions

The release, publication or distribution of this announcement in or into jurisdictions other than the UK and the availability of the Acquisition to Home Retail Group Shareholders who are not resident in the UK or who are subject to the laws and/or regulations of another jurisdiction (including the ability of such Home Retail Group Shareholders to vote their Home Retail Group Shares with respect to the Scheme and the Acquisition at the Home Retail Group Meetings, or to execute and deliver Forms of Proxy appointing another to vote at the Home Retail Group Meetings on their behalf) may be restricted by the laws and/or regulations of those jurisdictions. Therefore any persons who are not resident in the UK or who are subject to the laws and/or regulations of any jurisdiction other than the UK should inform themselves about, and observe, any applicable legal or regulatory requirements. Any failure to comply with the applicable restrictions may constitute a violation of the laws and/or regulations of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person.

This announcement has been prepared for the purposes of complying with English law, the Listing Rules, the rules of the London Stock Exchange and the Takeover Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and/or regulations of jurisdiction outside the UK.

Unless otherwise determined by Sainsbury's or required by the Takeover Code, and permitted by applicable law and regulation, the Acquisition will not be made, directly or indirectly, in, into or from any Restricted Jurisdiction where to do so would violate the laws and/or regulations in that jurisdiction and no person may vote in favour of the Acquisition from within any Restricted Jurisdiction if to do so would constitute a violation of the laws  and/or regulations of that jurisdiction. Accordingly, unless otherwise determined by Sainsbury's or Home Retail Group plc or required by the Takeover Code, and permitted by applicable law and regulation, copies of this announcement and any formal documentation relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from any Restricted Jurisdiction and persons receiving such documents (including agents, custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in, into or from any Restricted Jurisdiction. Any person (including, without limitation, any custodian, nominee and trustee) who would, or otherwise intends to, or who may have a contractual or legal obligation to, forward this announcement and/or the Scheme Document and/or any other related document to any jurisdiction outside the UK should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdiction. If the Acquisition is implemented by way of a Takeover Offer (unless otherwise permitted by applicable law and regulation), the Takeover Offer may not be made directly or indirectly, in, into or from or by the use of mails or any other means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national state or other securities exchange of any Restricted Jurisdiction and the Takeover Offer may not be capable of acceptance by any such use, means, instrumentality or facilities or from within any Restricted Jurisdiction.

Further details in relation to Home Retail Group Shareholders in overseas jurisdictions will be contained in the Scheme Document.

Note to US holders of Home Retail Group Shares and Home Retail Group ADR Holders

US holders of Home Retail Group Shares and Home Retail Group ADR Holders should note that the Acquisition relates to the securities of a UK company with a listing on the London Stock Exchange and is proposed to be implemented pursuant to a scheme of arrangement provided for under English company law. A transaction effected by means of a scheme of arrangement is not subject to the tender offer rules or the proxy solicitation rules under the US Exchange Act. Accordingly, the Acquisition will be subject to UK procedural and disclosure requirements and practices applicable to a scheme of arrangement involving a target company in England listed on the London Stock Exchange, which are different from the disclosure requirements of the US tender offer and proxy solicitation rules. The financial information included in this announcement and other documentation related to the Acquisition has been or will have been prepared in accordance with International Financial Reporting Standards and thus may not be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the US. If Sainsbury's exercises its right, in the circumstances provided for in this announcement, to implement the Acquisition by way of a Takeover Offer, such Takeover Offer will only be made in the United States if an exemption from the registration requirements of the US Securities Act is available.

The New Sainsbury's Shares to be issued pursuant to the Acquisition have not been registered under the US Securities Act or under any laws or with any securities regulatory authority of any state, district or other jurisdiction, of the United States, and may only be offered or sold in the United States in reliance on an exemption from registration requirements of the US Securities Act including in the case of the proposed scheme of arrangement, Section 3(a)(10) thereunder.

Neither the SEC nor any US state securities commission has approved or disapproved of the New Sainsbury's Shares to be issued in connection with the Acquisition, or determined if this announcement is accurate or complete. Any representation to the contrary is a criminal offence in the United States.

It may be difficult for US holders of Home Retail Group Shares and Home Retail Group ADR Holders to enforce their rights and claims arising out of the US federal securities laws, since Sainsbury's and Home Retail Group plc are located in countries other than the United States, and some or all of their officers and directors may be residents of countries other than the United States. US holders of Home Retail Group Shares and Home Retail Group ADR Holders may not be able to sue a non-US company or its officers or directors in a non-US court for violations of US securities laws. Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's judgement.

Forward-looking statements

This announcement (including information incorporated by reference in this announcement), oral statements made regarding the Acquisition, and other information published by Sainsbury's and Home Retail Group plc contain statements which are, or may be deemed to be, "forward-looking statements". All statements, other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of Sainsbury's and Home Retail Group plc about future events, and are therefore subject to risks and uncertainties which could cause actual results, performance or events to differ materially from those expressed or implied by the forward-looking statements. The forward-looking statements contained in this announcement include statements relating to the expected effects of the Acquisition on the Sainsbury's Group, the Home Retail Group and the Combined Group, the expected timing and scope of the Acquisition and other statements other than historical facts. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plan", "expect", "budget", "target", "aim", "scheduled", "estimate", "forecast", "intend", "anticipate", "assume" or "believe", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Although Sainsbury's and Home Retail Group plc believe that the expectations reflected in such forward-looking statements are reasonable, Sainsbury's and Home Retail Group plc can give no assurance that such expectations will prove to be correct. By their nature, forward-looking statements involve risks (known and unknown) and uncertainties (and other factors that are in many cases beyond the control of Sainsbury's and/or Home Retail Group plc) because they relate to events and depend on circumstances that may or may not occur in the future.

There are a number of factors that could affect the future operations of the Sainsbury's Group, the Home Retail Group and/or the Combined Group and that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include the satisfaction of the Conditions, as well as additional factors, such as: domestic and global business and economic conditions; asset prices; market related risks such as fluctuations in interest rates and exchange rates, industry trends, competition, changes in government and regulation, changes in the policies and actions of governments and/or regulatory authorities (including changes related to capital and tax), changes in political and economic stability, disruption in business operations due to reorganisation activities, interest rate, inflation and currency fluctuations, the timing impact and other uncertainties of future or planned acquisitions or disposals or combinations, the inability of the Combined Group to realise successfully any anticipated synergy benefits when the Acquisition is implemented, the inability of the Sainsbury's Group to integrate successfully the Home Retail Group's operations and programmes when the Acquisition is implemented, the Combined Group incurring and/or experiencing unanticipated costs and/or delays, or difficulties relating to the Acquisition when the Acquisition is implemented. Other unknown or unpredictable factors could affect future operations and/or cause actual results to differ materially from those in the forward-looking statements. Such forward-looking statements should therefore be construed in the light of such factors.

Each forward-looking statement speaks only as of the date of this announcement. Neither Sainsbury's nor Home Retail Group plc, nor any of their respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. All forward-looking statements contained in this announcement are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers are cautioned not to place undue reliance on these forward-looking statements. Other than in accordance with their legal or regulatory obligations (including under the Takeover Code, the Listing Rules and the Disclosure and Transparency Rules of the FCA), neither the Sainsbury's Group nor the Home Retail Group is under or undertakes any obligation, and each of the foregoing expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

No profit forecasts or estimates

Unless expressly stated otherwise, no statement in this announcement (including any statement of estimated synergies) is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per Sainsbury's Share or Home Retail Group Share for the current or future financial years would necessarily match or exceed the historical published earnings per Sainsbury's Share or Home Retail Group Share.

Disclosure requirements of the Takeover Code

Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1 per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the Offer Period and, if later, following the announcement in which any securities exchange offeror is first identified.

An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10^th Business Day following the commencement of the Offer Period and, if appropriate, by no later than 3.30 pm (London time) on the 10^th Business Day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes, interested in 1 per cent. or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the Business Day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the Offer Period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Publication on website and availability of hard copies

A copy of this announcement will be made available, subject to certain restrictions relating to persons resident in or subject to laws and/or regulations of Restricted Jurisdictions, on the Sainsbury's Group's website at http://www.j-sainsbury.co.uk/investor-centre/disclaimer/ and the Home Retail Group's website at https://www.homeretailgroup.com/investor-centre/sainsburys-offer/ by no later than 12 noon (London time) on the Business Day following this announcement. For the avoidance of doubt, neither the contents of those websites nor the contents of any website accessible from hyperlinks on those websites (or any other websites referred to in this announcement) are incorporated into, or form part of, this announcement.

Sainsbury's Shareholders and Home Retail Group Shareholders may request a hard copy of this announcement by email at [email protected] or in writing at Shareholder Services, 3^rd Floor, J Sainsbury plc, 33 Holborn, London EC1N 2HT (in the case of Sainsbury's Shareholders) or the Company Secretary of Home Retail Group plc in writing at 489-499 Avebury Boulevard, Milton Keynes MK9 2NW or Capita Asset Services in writing at 40 Dukes Place, London EC3A 7NH (in the case of Home Retail Group Shareholders), in each case during business hours. Sainsbury's Shareholders and Home Retail Group Shareholders may also request that all future documents, announcements and information sent to them in relation to the Acquisition be in hard copy form. A hard copy of such document, announcement (including this announcement) or information will not be sent unless so requested.

Information relating to Home Retail Group Shareholders

Please be aware that addresses, electronic addresses and certain other information provided by Home Retail Group Shareholders, persons with information rights and other relevant persons for the receipt of communications from Home Retail Group plc may be provided to Sainsbury's during the Offer Period as required under Section 4 of Appendix 4 of the Takeover Code.

Rounding

Certain figures included in this announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.