Directors at Sainsbury’s and Home Retail Group have agreed terms on a deal that will see the general merchandise retailer Argos become part of the supermarket group.

The deal values HRG at around £1.1bn, and will see the vendor’s shareholders receive cash, and shares in Sainsbury’s.

In a statement to shareholders this morning, the companies said Home Retail Group shareholders will receive 55 pence per share in cash and 0.321 Sainsbury’s shares per Home Retail share.

The terms also include a payout of 25 pence per share to reflect the £200m return in respect of the sale of Homebase to Wesfarmers, and a 2.8 pence per share payment in lieu of a final dividend.

Related: Deadline day approaches for Sainsbury’s to make formal Argos offer

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