SUPERMARKET group Sainsbury’s has said it made a bid approach for Argos and Homebase owner Home Retail Group in November, but the offer was rejected.

“The combination of Sainsbury’s and Home Retail Group is an attractive proposition for the customers and shareholders of both companies,” it said in a statement.

Sainsbury’s which has branches in Swindon said it was now considering its position.

But it cautioned there was no certainty this would result in a formal offer.

Under UK takeover rules Sainsbury’s has until February 2 to decide whether to make a formal offer.

Over the past year Sainsbury’s has been trialling Argos concessions in some of its stores, and the supermarket group said the two firms had complementary products.

In its statement, Sainsbury’s outlined its case for buying Home Retail Group saying it would boost sales growth, improve its delivery networks, and meant they could sell their products to each other’s customers.

Home Retail Group’s shares surged 25 per cent after the announcement, while Sainsbury’s fell five per cent.

Sainsbury’s is the second-largest British supermarket in the UK, with a 16.7 per cent share of the grocery market, according to Kantar Worldpanel. It was the only one of the big four to post a growth in sales for the 12 weeks to December 6.

Sainsbury’s, which was founded in 1869, now has about 1,200 supermarkets and convenience stores and employs about 161,000 people.

Home Retail Group, which is valued at around £1bn at its current share price, has been mooted as a possible takeover target since it issued a profit warning in October, which it blamed on the impact of Black Friday shopping deals and investment in its online ordering system.

Home Retail Group has about 271 stores across the UK and employs 18,000 staff.

Sainsbury’s originally co-founded the Homebase chain, but sold it in 2000 in a deal worth £969m in total.

Conlumino food and grocery analyst George Scott said this meant Sainsbury’s already had a good understanding of the sector.

He said if the deal went ahead it would help Sainsbury’s to better establish its presence in the non-food market.

“It would give it scope for shops within its existing stores where it has excess space. I think it’s a well thought out proposition,” he added.