Sainsbury's has confirmed that it will proceed with its offer for Home Retail Group (HRG), owner of Argos, and is "pleased" by last Friday's turn of events, which saw rival bidder Steinhoff international abandon pursuit in favour of purchasing white goods retailer Darty.

Sainsbury's has worked with HRG for a year to develop a clear strategy and vision for a company that combines the strengths of its grocery offer and the significant multichannel, multi-product and delivery network strengths of Argos, envisaging a powerful combination which "will create long-term value for the shareholders of both companies".

Ahead of Friday's 5pm deadline, Steinhoff backed out of the potential bidding war at the last minute. Sainsbury's share prices rose sharply, while HRG's dropped 6.7%.

Sainsbury's made an offer for the business at the start of February, before Steinhoff International issued a rival bid. Sainsbury’s subsequently made a cash and shares bid of £1.4b, an offer in line with the one made last month but bolstered by a rise in Sainsbury’s share price.

David Tyler, chairman of Sainsbury's, comments: "The UK grocery retail industry is undergoing a period of intense change in customer shopping behaviour and in the competitive environment. Against this backdrop, Sainsbury's has performed resiliently by offering great quality products at fair prices, by providing a differentiated service, and by developing strong multi-channel capabilities. All of this continues to be underpinned by our core values.

"This combination with HRG presents an opportunity to accelerate our strategy, delivering compelling revenue and cost synergies. We will create a multi-product, multi-channel proposition with fast delivery networks that we believe will be very attractive to the customers of both businesses."

According to a Sainsbury's spokesperson, the execution risk is low, as there are no significant systems or new infrastructure required to achieve the increased synergies identified. At the same time, Sainsbury’s recent Q4 financials demonstrate the progress already made against delivering its strategy.

The acquisition will see the business become the UK's largest non-food retailer. "We would be able to create a £6b non-food business that would rival Next, Amazon and Kingfisher, and really create a non-food business of scale," comments a spokesperson. "It would also give us significant  access to increased digital capability. We currently have 10 Argos trial concessions in store, and will have the opportunity to fold in a lot more to create a destination for sectors including home furnishings, giving customers easier access to products under one roof."

Sainsbury’s believes that the combination will generate EBITDA synergies of no less than £120m in the third full year after completion, further enhancing the attractiveness of the offer. It also expects to incur costs of approximately £140m across the first three full years, plus the same again in store fit-out expenditure.

The Homebase business has already been sold to Australian conglomerate Wesfamers for £340m.