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Sainsbury's has won its four-month battle to buy Argos after its owner agreed to a £1.4bn takeover.

The supermarket said the deal to buy Home Retail Group would create a "multi-product, multi-channel" retailer.

Sainsbury's will pay a combination of shares and cash, with Home Retail shareholders holding 12% of the combined business.

The deal should be completed in the third quarter of this year.

Chairman David Tyler said he believed the combined business would be "very attractive to customers" and create value for shareholders of both companies.

Why does Sainsbury's want Argos?

The supermarket had faced a rival bid for Home Retail from South Africa's Steinhoff, although a formal offer never materialised.

As many as 200 of Argos's 845 stores are expected to close over the coming years as leases expire, with some relocated in Sainsbury's supermarkets.

Shares in Home Retail Group fell 0.5% to 165p in afternoon trading, while Sainsbury's fell 1.1% to 273.2p.

Steve Clayton, head of equity research at Hargreaves Lansdown, said: "This deal catapults Sainsbury's exposure to non-food items forward by around £4bn a year, and offers tantalising synergies from integrating the Argos estate and delivery capabilities with Sainsbury's own.

"For Home Retail investors, the deal offers a welcome recovery in the value of their investment, following many years of difficult trading."

Clive Black, an analyst at Shore Capital, said Sainsbury's had not overpaid for the Argos owner, adding: "We see the HRG board recommendation as good news for Sainsbury's management and we remain neutral on Sainsbury's stock."

The deal spells the end for Home Retail Group as a listed company. In January, it sold the DIY chain Homebase to Australia's Wesfarmers for £340m.