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The BBC's Greg Wood
"Surprising that Sainsbury is thinking about selling its Homebase DIY business"
 real 56k

Wednesday, 23 August, 2000, 09:18 GMT 10:18 UK
Sainsbury's in Homebase talks
Sir Peter Davis
Sir Peter Davis was brought on board to turn the retailer around
Supermarket group Sainsbury's has confirmed it may sell its Homebase DIY stores.

In a statement, the group said it was considering strategic alternatives for Homebase. These include "an alliance, disposal or joint venture".

Sainsbury's has held discussions with a number of parties, the statement said.

A sale could raise as much as 1bn for the troubled retailer.

Potential buyers or partners include Home Depot, the world's largest DIY retailer, and LeRoy Merlin, one of Europe's biggest home improvement groups.

The company has sent out details of its Homebase business to prospective buyers, a report in the Financial Times said earlier on Wednesday.

Losing ground

Sainsbury, once the top performer in the UK grocery industry, has slipped behind its rivals Tesco and Asda which are considered to be more innovative and more responsive to their customers' needs.

The challenge now for its new chief executive Sir Peter Davis, who joined from the Prudential earlier this year, is to turn the company around.

He has warned shareholders the process could take three years but promised he would try to release more shareholder value from the retailer's assets.

Previous speculation had centred on a possible sale of the company's banking arm or its Shaws grocery business in the US.

Rising shares

So far, investors appear to have welcomed the possibility of a Homebase sale.

Shares climbed 12 pence or 3% to 346p in early trade. The share price had hit a low of 238p in March.

One analyst said a sale would make sense.

"They need to focus on their core activities. Also DIY is scaling up in Europe and Homebase will need significant resources to compete," he said.

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See also:

01 Mar 00 | Business
Fresh chief for Sainsbury's
26 Jul 00 | Business
Sainsbury's to clear out clutter
31 May 00 | Business
Sainsbury's profits slump
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