Argos (3) Image: Home Retail Group

Sainsbury's has launched a £1.3 billion bid for Home Retail Group, which owns Argos.

The supermarket has offered 161.3p per share, roughly 63% above Home Retail Group's share price on 4 January. It now has three weeks to complete due diligence on the Argos owner before making a firm offer.

Sainsbury's revealed in January that Home Retail Group had previously rejected an approach in November.

The supermarket chain's chief financial officer, John Rogers, said he is confident that Sainsbury's and Home Retail Group shareholders would back the deal. Analysts have calculated that £120 million worth of savings could be achieved by 2019 if the two companies were to combine, but Mr Rogers said that number was "conservative".

But it it thought that the deal hinges on the confirmation of Home Retail Group selling Homebase to Australian retail firm Wesfarmers for £340m.

Home Retail Group's shares have grown by around 50% since Sainsbury's approach was made public, but the price actually fell 0.4% following news of this offer. Sainsbury's, on the other hand, saw its price rise 1.6%.