REG - Sainsbury(J) PLC Home Retail Grp Plc - Offer for Home Retail Group plc <Origin Href="QuoteRef">HOME.L</Origin> <Origin Href="QuoteRef">SBRY.L</Origin> - Part 3

J SainsburyAnnouncement

19/03/2016 16:17

- Part 3: For the preceding part double click  ID:nRSR6453Sb 

rights, warrants or
options to subscribe for or acquire, any such shares or convertible securities
or transferred or sold or agreed to transfer or sell or authorised or proposed
the transfer or sale of HRG Shares out of treasury; 
 
(ii)        recommended, declared, paid or made or proposed to recommend,
declare, pay or make any bonus, dividend or other distribution (whether
payable in cash or otherwise) other than to HRG or one of its wholly-owned
subsidiaries; 
 
(iii)       save as between HRG and its wholly-owned subsidiaries or between
such wholly-owned subsidiaries, merged with (by statutory merger or otherwise)
or demerged from or acquired any body corporate, partnership or business or
acquired or disposed of, or, other than in the ordinary course of business,
transferred, mortgaged or charged or created any security interest over, any
assets or any right, title or interest in any asset (including shares and
trade investments) or authorised, proposed or announced any intention to do
so; 
 
(iv)       save as between HRG and its wholly-owned subsidiaries or between
such wholly-owned subsidiaries, made, authorised, proposed or announced an
intention to propose any change in its loan capital; 
 
(v)        issued, authorised or proposed or announced an intention to
authorise or propose the issue of, or made any change in or to the terms of,
any debentures or (save in the ordinary course of business and save as between
HRG and its wholly-owned subsidiaries or between such wholly-owned
subsidiaries) incurred or increased any indebtedness or become subject to any
contingent liability to an extent which is material in the context of the
Wider HRG Group or in the context of the Offer; 
 
(vi)       entered into, varied, authorised or proposed entry into or
variation of, or announced its intention to enter into or vary, any material
contract, transaction, arrangement or commitment (whether in respect of
capital expenditure or otherwise) (otherwise than in the ordinary course of
business) which is of a long term, unusual or onerous nature, or which
involves or could reasonably be expected to involve an obligation of a nature
or magnitude which is, in any such case, material in the context of the Wider
HRG Group or in the context of the Offer, or which is or is reasonably likely
to be restrictive on the business of any member of the Wider HRG Group or the
Wider Sainsbury's Group to an extent which is or is likely to be material to
the Wider HRG Group or the Wider Sainsbury's Group in each case taken as a
whole or in the context of the Offer; 
 
(vii)      entered into any licence or other disposal of intellectual property
rights of any member of the Wider HRG Group which are material in the context
of the Wider HRG Group and outside the normal course of business; 
 
(viii)      entered into, varied, authorised or proposed entry into or
variation of, or announced its intention to enter into or vary the terms of or
made any offer (which remains open for acceptance) to enter into or vary the
terms of, any contract, commitment, arrangement or any service agreement with
any director or senior executive of the Wider HRG Group to an extent which is
material in the context of the Wider HRG Group or in the context of the Offer
save for salary increases, bonuses or variations of terms in the ordinary
course; 
 
(ix)       proposed, agreed to provide or modified the terms of any share
option scheme, incentive scheme, or other benefit relating to the employment
or termination of employment of any employee of the Wider HRG Group which,
taken as a whole, are material in the context of the Wider HRG Group taken as
a whole or in the context of the Offer; 
 
(x)        other than as provided for in the agreement entered into on 17
March 2016 by the trustee of the Home Retail Group Pension Scheme and
Sainsbury's in relation to the future funding of that scheme following
Completion, taken or having procured the trustees of the relevant pension
scheme to take, or any such trustees having taken any action, to (I) propose,
make or agree to any significant change to: (a) the terms of the trust deeds,
rules, policy or other governing documents constituting any pension scheme or
other retirement or death benefit arrangement established for the directors,
former directors, employees or former employees of any entity in the Wider HRG
Group or their dependants (a "Relevant Pension Plan"); (b) the basis on which
benefits accrue, pensions which are payable or the persons entitled to accrue
or be paid benefits, under any Relevant Pension Plan; (c) the basis on which
the liabilities of any Relevant Pension Plan are funded or valued; (d) the
manner in which the assets of any Relevant Pension Plan are invested; (e) the
basis or rate of employer contribution to a Relevant Pension Plan; or (II)
enter into or propose to enter into one or more bulk annuity contracts in
relation to any Relevant Pension Plan; or (III) carry out any act: (a) which
would or could reasonably be expected to lead to the commencement of the
winding up of any Relevant Pension Plan; (b) which would or might create a
material debt owed by an employer to any Relevant Pension Plan; (c) which
would or might accelerate any obligation on any employer to fund or pay
additional contributions to any Relevant Pension Plan; or (d) which would or
might give rise directly or indirectly to a liability in respect of a Relevant
Pension Plan arising out of the operation of sections 38 to 56 inclusive of
the Pensions Act 2004 in relation to the scheme; 
 
(xi)       changed the trustee or trustee directors or other fiduciary of any
Relevant Pension Plan; 
 
(xii)      entered into, implemented or effected, or authorised, proposed or
announced its intention to implement or effect, any joint venture, asset or
profit sharing arrangement, partnership, composition, assignment,
reconstruction, amalgamation, commitment, scheme or other transaction or
arrangement (other than the Offer) which is material in the context of the
Wider HRG Group taken as a whole or in the context of the Offer; 
 
(xiii)      purchased, redeemed or repaid or announced any proposal to
purchase, redeem or repay any of its own shares or other securities or reduced
or, save in respect of the matters mentioned in sub-paragraph (i) above, made
any other change to any part of its share capital; 
 
(xiv)     waived, compromised or settled any claim otherwise than in the
ordinary course of business which is material in the context of the Wider HRG
Group taken as a whole or in the context of the Offer; 
 
(xv)      made any material alteration to its articles of association or other
constitutional documents; 
 
(xvi)     taken or proposed any steps, corporate action or had any legal
proceedings instituted or threatened against it in relation to the suspension
of payments, a moratorium of any indebtedness, its winding-up (voluntary or
otherwise), dissolution, reorganisation or for the appointment of any
administrator, receiver, manager, administrative receiver, trustee or similar
officer of all or any of its assets or revenues or any analogous proceedings
in any jurisdiction or appointed any analogous person in any jurisdiction or
had any such person appointed; 
 
(xvii)     been unable, or admitted in writing that it is unable, to pay its
debts or commenced negotiations with one or more of its creditors with a view
to rescheduling or restructuring any of its indebtedness, or having stopped or
suspended (or threatened to stop or suspend) payment of its debts generally or
ceased or threatened to cease carrying on all or a substantial part of its
business; 
 
(xviii)    entered into any contract, commitment, agreement or arrangement
otherwise than in the ordinary course of business or passed any resolution or
made any offer (which remains open for acceptance) with respect to or
announced an intention to, or to propose to, effect any of the transactions,
matters or events referred to in this Condition; 
 
(xix)     terminated or varied the terms of any agreement or arrangement
between any member of the Wider HRG Group and any other person in a manner
which would or might be expected to have a material adverse effect on the
financial position of the Wider HRG Group taken as a whole; or 
 
(xx)      having taken (or agreed or proposed to take) any action which
requires, or would require, the consent of the Panel or the approval of HRG
Shareholders in general meeting in accordance with, or as contemplated by,
Rule 21.1 of the Takeover Code; 
 
No material adverse change 
 
(l)         since 28 February 2015 and except as Fairly Disclosed: 
 
(i)         there having been no adverse change and no circumstance having
arisen which would be expected to result in any adverse change or
deterioration in the business, assets, value, financial or trading position,
profits, prospects or operational performance of any member of the Wider HRG
Group to an extent which is material to the Wider HRG Group taken as a whole
or in the context of the Offer or in the context of the obligations of any
member of the Wider Sainsbury's Group in connection with the financing of the
Offer; 
 
(ii)        no litigation, arbitration proceedings, prosecution or other legal
proceedings including, without limitation, with regard to intellectual
property rights used by the Wider HRG Group having been threatened, announced
or instituted by or against or remaining outstanding against any member of the
Wider HRG Group or to which any member of the Wider HRG Group is or may become
a party (whether as claimant or defendant or otherwise) and no enquiry,
review, investigation or enforcement proceedings by, or complaint or reference
to, any Third Party against or in respect of any member of the Wider HRG Group
having been threatened, announced or instituted by or against, or remaining
outstanding in respect of, any member of the Wider HRG Group which, in any
such case, might reasonably be expected to have a material adverse effect on
the Wider HRG Group taken as a whole or in the context of the Offer; 
 
(iii)       no contingent or other liability having arisen, increased or
become apparent which might be likely adversely to affect the business,
assets, financial or trading position, profits, prospects or operational
performance of any member of the Wider HRG Group to an extent which is
material to the Wider HRG Group taken as a whole or in the context of the
Offer; and 
 
(iv)       no steps having been taken and no omissions having been made which
are likely to result in the withdrawal, cancellation, termination or
modification of any licence held by any member of the Wider HRG Group, which
is necessary for the proper carrying on of its business and the withdrawal,
cancellation, termination or modification of which is material and likely to
have a material adverse effect on the Wider HRG Group taken as a whole or in
the context of the Offer; 
 
(m)       since 28 February 2015 and except as Fairly Disclosed, Sainsbury's
not having discovered: 
 
(i)         that any financial, business or other information concerning the
Wider HRG Group publicly announced or disclosed to any member of the Wider
Sainsbury's Group at any time by or on behalf of any member of the Wider HRG
Group or to any of their advisers is misleading, contains a misrepresentation
of fact or omits to state a fact necessary to make that information not
misleading and which is, in any case, adverse to and material in the context
of the Wider HRG Group taken as a whole or the Offer; 
 
(ii)        that any member of the Wider HRG Group is subject to any
liability, contingent or otherwise, and which is adverse to and material in
the context of the Wider HRG Group or the Offer; or 
 
(iii)       any information which affects the import of any information
disclosed to Sainsbury's at any time by or on behalf of any member of the
Wider HRG Group which is material in the context of the Wider HRG Group or in
the context of the Offer; 
 
Environmental liabilities 
 
(n)        except as Fairly Disclosed, Sainsbury's not having discovered
that: 
 
(i)         any past or present member of the Wider HRG Group has not complied
with any applicable legislation or regulations, notices or other requirements
of any jurisdiction or any Third Party or any Authorisations relating to the
use, treatment, storage, carriage, disposal, discharge, spillage, release,
leak or emission of any waste or hazardous substance or greenhouse gas, or any
substance likely to impair the environment (including property) or harm the
health of humans, animals or other living organisms or eco-systems or
otherwise relating to environmental matters or the health and safety of
humans, which non-compliance would be likely to give rise to any liability
including any penalty for non-compliance (whether actual or contingent) on the
part of any member of the Wider HRG Group in each case which is material in
the context of the Wider HRG Group taken as a whole or in the context of the
Offer; or 
 
(ii)        there has been a disposal, discharge, spillage, accumulation,
leak, emission, release or the migration, production, supply, treatment,
storage, transport or use of any waste or hazardous substance or greenhouse
gas or any substance likely to impair the environment (including any property)
or harm human health which (whether or not giving rise to non-compliance with
any law or regulation) would be likely to give rise to any liability (whether
actual or contingent) on the part of any member of the Wider HRG Group in each
case which is material in the context of the Wider HRG Group taken as a whole
or in the context of the Offer; or 
 
(iii)       there is or is likely to be any obligation or liability (whether
actual or contingent) or requirement to make good, remediate, repair,
re-instate or clean up any property, asset currently or previously owned,
occupied or made use of by any past or present member of the Wider HRG Group
(or on its behalf), or in which any such member may have or previously have
had or be deemed to have had an interest, or other elements of the environment
(including any controlled waters) under any environmental legislation, common
law, regulation, notice, circular, Authorisation, other legally binding
requirement or order of any Third Party or to contribute to the cost thereof
or associated therewith or indemnify any person in relation thereto in any
such case to an extent which is material in the context of the Wider HRG Group
taken as a whole or in the context of the Offer; or 
 
(iv)       circumstances exist (whether as a result of the Offer or
otherwise): 
 
(A)       which would be likely to lead to any Third Party instituting; or 
 
(B)       whereby any member of the Wider Sainsbury's Group or any present or
past member of the Wider HRG Group would be likely to be required to
institute, 
 
an environmental audit or take any other steps which would in any such case be
likely to result in any liability (whether actual or contingent) to improve,
modify existing or install new plant, machinery or equipment or carry out
changes in the processes currently carried out or make good, remediate,
repair, re-instate or clean up any land or other asset currently or previously
owned, occupied or made use of by any past or present member of the Wider HRG
Group (or on its behalf) or by any person for which a member of the Wider HRG
Group is or has been responsible, or in which any such member may have or
previously have had or be deemed to have had an interest, which in any case is
material in the context of the Wider HRG Group taken as a whole or in the
context of the Offer; or 
 
(v)        circumstances exist whereby a person or class of persons would be
likely to have any claim or claims in respect of any product or process of
manufacture or materials used therein currently or previously manufactured,
sold or carried out by any past or present member of the Wider HRG Group which
claim or claims would be likely, adversely to affect any member of the Wider
HRG Group and which is material in the context of the Wider HRG Group taken as
a whole or in the context of the Offer; 
 
Intellectual Property 
 
(o)        no circumstance having arisen or event having occurred in relation
to any intellectual property owned or used by any member of the Wider HRG
Group which would have a material adverse effect on the Wider HRG Group taken
as a whole or is otherwise material in the context of the Offer, including: 
 
(i)         any member of the Wider HRG Group losing its title to any
intellectual property, or any intellectual property owned by the Wider HRG
Group and being revoked, cancelled or declared invalid; 
 
(ii)        any claim being asserted in writing or threatened in writing by
any person challenging the ownership of any member of the Wider HRG Group to,
or the validity or effectiveness of, any of its intellectual property; or 
 
(iii)       any agreement regarding the use of any intellectual property
licensed to or by any member of the Wider HRG Group being terminated or
varied; 
 
Anti-corruption and sanctions 
 
(p)        except as Fairly Disclosed, Sainsbury's not having discovered
that: 
 
(i)         any past or present member, director, officer or employee of the
Wider HRG Group or any person that performs or has performed services for or
on behalf of any such company is or has at any time engaged in any activity,
practice or conduct (or omitted to take any action) in contravention of the UK
Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977, as amended or
any other applicable anti-corruption legislation; 
 
(ii)        any past or present member, director, officer or employee of the
Wider HRG Group or any person that performs or has performed services for or
on behalf of any such company may be liable or responsible for the Wider HRG
Group has engaged in any activity or business with, or made any investments
in, or made any funds or assets available to, or received any funds or assets
from any government, entity or individual covered by any of the economic
sanctions administered by the United Nations or the European Union (or any of
their respective member states) or the United States Office of Foreign Assets
Control or any other governmental or supranational body or authority in any
jurisdiction; and 
 
No criminal property 
 
(q)        except as Fairly Disclosed, Sainsbury's not having discovered that
any asset of any member of the Wider HRG Group constitutes criminal property
as defined by section 340(3) of the Proceeds of Crime Act 2002 (but
disregarding paragraph (b) of that definition). 
 
2.         Waiver and invocation of the Conditions 
 
Subject to the requirements of the Panel, Sainsbury's reserves the right to
waive, in whole or in part, all or any of the Conditions except for Conditions
1(a) to 1(d) inclusive, which cannot be waived. Conditions 1(b) to 1(q)
inclusive must be fulfilled or (if capable of waiver) waived on or before
midnight on the 21st calendar day after the later of the First Closing Date
and the date on which Condition 1(a) is fulfilled (or, in each case, such
later date as the Panel may agree), failing which the Offer will lapse.
Sainsbury's shall be under no obligation to waive (if capable of waiver) or
treat as fulfilled any of the Conditions by a date earlier than the latest
date specified above for the fulfilment or waiver thereof, notwithstanding
that any other Conditions may at any earlier date have been waived or
fulfilled and that there are at such earlier date no circumstances indicating
that any of such Conditions may not be capable of fulfilment. In any event,
all of the Conditions to the Offer must be fulfilled or (if capable of waiver)
waived on or before midnight on the 81st calendar day following the date on
which the Offer Document is published or such other date as may be agreed with
the Panel. 
 
If Sainsbury's is required by the Panel to make an offer for HRG Shares under
the provisions of Rule 9 of the Takeover Code, Sainsbury's may make such
alterations to the Conditions and further terms of the Offer as are necessary
to comply with the provisions of that Rule. 
 
3.         Implementation by way of a Scheme 
 
Sainsbury's reserves the right to implement the Acquisition by way of a
court-sanctioned Scheme in accordance with Part 26 of the 2006 Act (with the
consent of the Panel). In such an event, the terms of the Acquisition would be
substantially the same as those of the Offer, subject to appropriate
amendments as set out in paragraph 24 of this announcement (which involves a
cancellation scheme followed by New TopCo Capital Reduction). Sainsbury's
reserves the right to implement the Acquisition by way of a transfer scheme
under Part 26 of the 2006 Act or through different steps and processes (with
the consent of the Panel, if required). 
 
4.         Further terms of the Offer 
 
The Offer will lapse if there is a Phase 2 CMA Reference before 1.00 p.m. on
the First Closing Date or the date on which the Offer becomes or is declared
unconditional as to acceptances, whichever is later. If the Offer so lapses,
the Offer will cease to be capable of further acceptance and accepting HRG
Shareholders and Sainsbury's will cease to be bound by Forms of Acceptance
submitted before the time when the Offer lapses. 
 
If any dividend or other distribution is announced, declared, made, paid or
becomes payable by HRG in respect of the HRG Shares on or after the date of
this announcement and prior to the date on which the Offer becomes or is
declared unconditional in all respects, other than or in excess of the Special
Dividend, Sainsbury's reserves the right to reduce the value of the Offer
Consideration (including, for the avoidance of doubt, by reducing the cash
element of the Offer Consideration and/or adjusting the Exchange Ratio) by the
amount of all or part of the dividend or other distribution, or all or part of
the amount in excess of the Special Dividend, that has been announced,
declared, made, paid or become payable. In calculating the amount of any such
reduction, the value of New Sainsbury's Shares will be calculated by reference
to the Closing Price of Sainsbury's Shares on the last trading day before
Sainsbury's announcement of a reduction in the Offer Consideration. 
 
The HRG Shares will be acquired pursuant to the Offer with full title
guarantee, fully paid and free from all liens, charges, equities,
encumbrances, rights of pre-emption and any other interests of any nature
whatsoever and together with all rights now or hereafter attaching thereto,
including without limitation voting rights and the right to receive and retain
in full all dividends and other distributions (if any) declared, made or paid
on or after the date of this announcement, other than the Special Dividend. 
 
The New Sainsbury's Shares will be issued credited as fully paid and will rank
pari passu in all respects with the Existing Sainsbury's Shares from the date
of issue, save that they will not participate in any dividend payable by
Sainsbury's with reference to a record date prior to the date on which the
Offer becomes or is declared unconditional in all respects. 
 
Fractions of New Sainsbury's Shares will not be allotted or issued to HRG
Shareholders and entitlements will be rounded down to the nearest whole number
of New Sainsbury's Shares and all fractions of New Sainsbury's Shares will be
aggregated and sold in the market as soon as practicable after the date the
Offer becomes or is declared unconditional in all respects. The net proceeds
of such sale (after deduction of all expenses and commissions incurred in
connection with the sale) will be distributed in due proportions to HRG
Shareholders who would otherwise have been entitled to such fractions, save
that individual entitlements to amounts of less than £5 will be retained for
the benefit of the Combined Group. 
 
The availability of the Offer to HRG Shareholders who are not resident in the
UK or who are subject to the laws and/or regulations of another jurisdiction
(including the ability of such HRG Shareholders to accept the Offer and/or to
execute and deliver a Form of Acceptance) may be restricted by the laws and/or
regulations of those jurisdictions. Therefore any persons who are not resident
in the UK or who are subject to the laws and/or regulations of any
jurisdiction other than the UK should inform themselves about, and observe,
any applicable legal or regulatory requirements. 
 
The New Sainsbury's Shares to be issued pursuant to the Offer have not been,
and will not be, listed on any stock exchange other than the London Stock
Exchange and have not been, and will not be, registered under the US
Securities Act or under any laws or with any securities regulatory authority
of any state, district or other jurisdiction, of the United States, nor have
clearances been, nor will they be, obtained from the securities commission or
similar authority of any province or territory of Canada and no prospectus has
been, or will be, filed, or registration made, under any securities law of any
province or territory of Canada, nor has a prospectus in relation to the New
Sainsbury's Shares been, nor will one be, lodged with, or registered by, the
Australian Securities and Investments Commission, nor have any steps been
taken, nor will any steps be taken, to enable the New Sainsbury's Shares to be
offered in compliance with applicable securities laws of Japan and no
regulatory clearances in respect of the New Sainsbury's Shares have been, or
will be, applied for in any other jurisdiction. Accordingly, unless an
exemption under relevant securities laws is available, the New Sainsbury's
Shares are not being, and may not be, offered, sold, resold, delivered or
distributed, directly or indirectly, in, into or from the United States or any
other Restricted Jurisdiction or any resident of the United States or any
other Restricted Jurisdiction. Neither the SEC nor any US state securities
commission has approved or disapproved of the New Sainsbury's Shares, or
determined if this announcement is accurate or complete. Any representation to
the contrary is a criminal offence. 
 
Appendix 2
SOURCES AND BASES OF INFORMATION 
 
Unless otherwise stated in this announcement: 
 
1.         the value attributed to HRG's issued ordinary share capital is
based on 813,445,001 HRG Shares in issue as at the Last Practicable Date; 
 
2.         any references to the existing issued share capital of Sainsbury's
are based on 1,924,286,429 Sainsbury's Shares in issue as at the Last
Practicable Date; 
 
3.         the market capitalisation for Sainsbury's is based on 1,924,286,429
Sainsbury's Shares in issue and the Closing Price of 281.5 pence per
Sainsbury's Share on the Last Practicable Date; 
 
4.         the market capitalisation for HRG is based on 813,445,001 HRG
Shares in issue and the Closing Price of 181.2 pence per HRG Share on the Last
Practicable Date; 
 
5.         unless otherwise stated, the financial information relating to
Sainsbury's is extracted from the audited consolidated financial statements of
the Sainsbury's Group for the 52-week period ended 14 March 2015, prepared in
accordance with IFRS; 
 
6.         unless otherwise stated, the financial information relating to HRG
is extracted from the audited consolidated financial statements of the HRG
Group for the 52-week period ended 28 February 2015, prepared in accordance
with IFRS; and 
 
7.         unless otherwise stated, all prices for HRG and Sainsbury's Shares
have been derived from the Daily Official List and represent Closing Prices on
the relevant date(s). 
 
Appendix 3
REVISED quantified Financial benefits statement 
 
PART A 
 
Paragraph 4 of this announcement includes revised statements of estimated cost
savings and synergies expected to arise from the Offer (together, the
"RevisedQuantified Financial Benefits Statement"). A copy of the Revised
Quantified Financial Benefits Statement is set out below: 
 
"The Sainsbury's Directors now expect a higher level of EBITDA synergies in
the third full year after Completion of not less than £160 million. This
represents an increase of one third compared to the previous estimate of not
less than £120 million EBITDA synergies. This higher EBITDA synergy estimate
results from (i) an increase of £15 million in the estimated synergies from
Argos concessions due to an increase in the number of concession opportunities
and increased occupancy cost savings, offset by a reduction in the estimated
Sainsbury's food and grocery halo sales; (ii) an increase of £30 million in
the estimated cost synergies from central and support functions savings as
well increased buying cost savings; and (iii) a decrease of £5 million in
other revenue synergies as a result of revised assumptions on clothing,
homewares and seasonal revenue synergies (3). 
 
Note: 
 
(3)           Numbers refer to synergies in the third full year after
Completion. 
 
Approximately 15 per cent. of the estimated EBITDA synergies are expected to
be realised in the first full year after Completion, approximately 65 per
cent. in the second full year after Completion and 100 per cent. in the third
full year after Completion. 
 
The constituent elements of quantified synergies, which are in addition to
savings previously targeted by Sainsbury's and HRG separately, comprise the
following: 
 
·          approximately 45 per cent. of the identified synergies
(approximately £75 million) are expected to be generated from Argos
concessions, arising from (i) cost savings generated from the relocation of
certain existing Argos stores into concessions in Sainsbury's stores, and (ii)
revenue gains from new concessions within Sainsbury's stores, including but
not limited to cross-selling opportunities and the expansion of Click and
Collect desks. Of these synergies, approximately 15 per cent. are expected to
be realised in the first full year after Completion, approximately 60 per
cent. in the second full year after Completion and 100 per cent. in the third
full year after Completion; 
 
·          approximately 45 per cent. of the identified synergies
(approximately £70 million) are expected to be cost synergies generated by
removing duplication and overlap from both central and support functions at
Sainsbury's and HRG. There are also benefits to the Combined Group in
purchasing of goods for resale and goods not for resale from sharing best
practice and increased scale. Of these synergies, approximately 15 per cent.
are expected to be realised in the first full year after Completion,
approximately 65 per cent. in the second full year after Completion and 100
per cent. in the third full year after Completion; and 
 
·          the remainder of the identified synergies (approximately £15
million) are expected to be further revenue synergies, principally from the
sale of Sainsbury's clothing, homewares and seasonal and leisure ranges
through the existing Argos network together with the roll-out of Sainsbury's
ATMs to Argos locations and the sale of Habitat products through Sainsbury's
channels. Of these synergies, approximately 25 per cent. are expected to be
realised in the first full year after Completion, approximately 80 per cent.
in the second full year after Completion and 100 per cent. in the third full
year after Completion. 
 
It is expected that the realisation of the identified synergies will require
one-off exceptional costs of approximately £130 million, of which
approximately 50 per cent. are expected to be incurred in the first full year
after Completion, 20 per cent. in the second full year after Completion and 30
per cent. in the third full year after Completion. 
 
It is also expected that incremental capital expenditure of approximately £140
million will be incurred in the three years following Completion, relating to
store fit-out expenditure. Approximately 30 per cent. of this capital
expenditure is to be incurred in the first full year after Completion, 40 per
cent. in the second full year after Completion and 30 per cent. in the third
full year after Completion. 
 
The synergies referred to above are expected to be recurring and are expected
to arise as a direct result of the Offer and could not be achieved
independently of the Offer. The synergies are also stated net of anticipated
dis-synergies, which arise principally from lost sales in the Argos stores
moving more than one mile or changing to a different retail location type as
well as estimated cannibalisation impact of new infill Argos concessions. For
the avoidance of doubt, the EBITDA impact of the synergies as set out above
already reflects the impact of these identified dis-synergies." 
 
Further information on the bases of belief supporting the Revised Quantified
Financial Benefits Statement, including the principal assumptions and sources
of information, is set out below. 
 
Bases of Belief and Principal Assumptions 
 
Following initial discussions regarding the Offer, a synergy development team
was established to evaluate and assess the potential synergies available for
the integration and undertake an initial planning exercise (the "Sainsbury's
Synergy Team" or the "Team"). The Team, which comprises senior strategy and
financial colleagues, has worked collaboratively to identify and quantify
potential synergies as well as estimate any associated costs on behalf of the
Sainsbury's Directors. The Team also worked alongside external consultants to
prepare a detailed synergy plan. 
 
The Team has engaged with the relevant functional heads and other personnel to
provide input into the development process and to agree on the nature and
quantum of the identified synergy initiatives. In preparing the Revised
Quantified Financial Benefits Statement, Sainsbury's has had a level of due
diligence access to HRG in order to confirm certain key data points as well as
information available to it from existing trials of Argos concessions in its
stores. In circumstances where data has been limited due to lack of access to
HRG, the Team has made estimates and assumptions to aid its development of
individual synergy initiatives. The assessment and quantification of the
potential synergies have in turn been informed by Sainsbury's management's
industry experience and knowledge of its existing business. 
 
The Sainsbury's Synergy Team has sought to assess synergies in relation to the
HRG Group central functions and the Argos business. The cost bases used as the
basis for the Revised Quantified Financial Benefits Statement are those
contained in the management accounts of HRG for the financial year ended 28
February 2015 and the 2015 Annual Report and Accounts of Sainsbury's. 
 
The majority of cost saving synergies are driven by physical consolidation
that is within the influence of Sainsbury's management, whereas the delivery
of the revenue synergies is more complex and to some extent outside the full
control of Sainsbury's management. 
 
In general, the synergy assumptions have in turn been risk adjusted,
exercising a degree of prudence in the calculation of the estimated synergy
benefit set out above. 
 
Reports 
 
As required by Rule 28.1(a) of the Takeover Code, Deloitte, as reporting
accountants to Sainsbury's, have provided a report stating that, in their
opinion, the Revised Quantified Financial Benefits Statement has been properly
compiled on the basis stated. In addition, Morgan Stanley and UBS, as joint
financial advisers to Sainsbury's, have provided a joint report stating that,
in their view, the Revised Quantified Financial Benefits Statement has been
prepared with due care and consideration. 
 
Copies of these reports are included in Part B and Part C of this Appendix 3.
Each of Deloitte, Morgan Stanley and UBS has given and not withdrawn its
consent to the publication of its report in this announcement in the form and
context in which it is included. 
 
Notes 
 
1.         These statements are not intended as a profit forecast and should
not be interpreted as such. These statements of estimated synergies relate to
future actions and circumstances which, by their nature, involve risks,
uncertainties and contingencies. As a result, the estimated synergies referred
to may not be achieved, or may be achieved later or sooner than estimated, or
those achieved could be materially different from those estimated. Neither the
Revised Quantified Financial Benefits Statement nor any other statement in
this announcement should be construed as a profit forecast or interpreted to
mean that Sainsbury's earnings in the first full year following Completion, or
in any subsequent period, will necessarily match or be greater than or be less
than those of Sainsbury's or HRG for the relevant preceding financial period
or any other period. 
 
2.         Due to the scale of the enlarged Sainsbury's business, there may be
additional changes to the Combined Group's operations. As a result, and given
the fact that the changes relate to the future, the resulting synergies may be
materially greater or less than those estimated. 
 
3.         In arriving at the estimate of synergies set out in this
announcement, the Sainsbury's Synergy Team has assumed that: 
 
(a)       there will be no significant impact on the underlying operations of
either business; 
 
(b)       there will be no material change to macroeconomic, political or
legal conditions in the markets or regions in which in the Combined Group
operates which will materially impact on the implementation of or costs to
achieve the proposed cost savings; and 
 
(c)       there will be no material change in exchange rates. 
 
PART B
REPORT FROM DELOITTE 
 
The Board of Directors 
 
on behalf of J Sainsbury Plc 
 
33 Holborn 
 
London 
 
EC1N 2HT 
 
UBS Limited 
 
1 Finsbury Avenue 
 
London 
 
EC2M 2PP 
 
Morgan Stanley & Co International plc 
 
25 Cabot Square 
 
Canary Wharf 
 
London 
 
E14 4QA 
 
18 March 2016 
 
Dear Sirs 
 
OFFER FOR HOME RETAIL GROUP PLC (THE "TARGET") BY J SAINSBURY PLC (THE
"OFFEROR") 
 
We report on the statement made by the directors of the Offeror (the
"Directors") of quantified financial benefits set out in Part A of Appendix 3
of the announcement (the "Announcement") dated 18 March 2016 issued by the
Offeror (the "Statement"). The Statement has been made in the context of the
disclosures within Part A setting out, inter alia, the basis of the Directors'
belief (identifying the principal assumptions and sources of information)
supporting the Statement and their analysis, explanation and quantification of
the constituent elements. 
 
Responsibilities 
 
It is the responsibility of the Directors to prepare the Statement in
accordance with Rule 28 of the Takeover Code. 
 
It is our responsibility to form our opinion, as required by Rule 28.1(a) of
the Takeover Code, as to whether the Statement has been properly compiled on
the basis stated and to report that opinion to you. 
 
This report is given solely for the purposes of complying with Rule 28.1(a)(i)
of the Takeover Code and for no other purpose. Therefore, to the fullest
extent permitted by law we do not assume any other responsibility to any
person for any loss suffered by any such person as a result of, arising out
of, or in connection with this report or our statement, required by and given
solely for the purposes of complying with Rule 23.3 of the Takeover Code,
consenting to its inclusion in the Announcement. 
 
Basis of opinion 
 
We conducted our work in accordance with the Standards for Investment
Reporting issued by the Auditing Practices Board in the United Kingdom. 
 
Our work included considering whether the Statement has been accurately
computed based upon the disclosed bases of belief (including the principal
assumptions). Whilst the bases of belief (and the principal assumptions) upon
which the Statement is based are solely the responsibility of the Directors,
we considered whether anything came to our attention to indicate that any of
the bases of belief (or principal assumptions) adopted by the Directors which,
in our opinion, are necessary for a proper understanding of the Statement,
have not been disclosed or if any basis of belief (or principal assumption)
made by the Directors appears to us to be unrealistic. Our work did not
involve any independent examination of any of the financial or other
information underlying the Statement. 
 
We planned and performed our work so as to obtain the information and
explanations we considered necessary in order to provide us with reasonable
assurance that the Statement has been properly compiled on the basis stated. 
 
Since the Statement (and the principal assumptions on which it is based)
relates to the future, the actual financial benefits achieved are likely to be
different from those anticipated in the Statement and the differences may be
material. Accordingly, we can express no opinion as to the achievability of
the financial benefits identified by the Directors in the Statement. 
 
Our work has not been carried out in accordance with auditing or other
standards and practices generally accepted in jurisdictions outside the United
Kingdom, including the United States of America, and accordingly should not be
relied upon as if it had been carried out in accordance with those standards
and practices. We have not consented to the inclusion of this report and our
opinion in any registration statement filed with the SEC under the US
Securities Act of 1933 (either directly or by incorporation by reference) or
in any offering document enabling an offering of securities in the United
States (whether under Rule 144A or otherwise). We therefore accept no
responsibility to, and deny any liability to, any person using this report and
opinion in connection with any offering of securities inside the United States
of America or who makes a claim on the basis they had acted in reliance on the
protections afforded by United States of America law and regulation. 
 
Opinion 
 
In our opinion, based on the foregoing, the Statement has been properly
compiled on the basis stated. 
 
Yours faithfully 
 
Deloitte LLP 
 
Chartered Accountants 
 
Deloitte LLP is a limited liability partnership registered in England and
Wales with registered number OC303675 and its registered office at 2 New
Street Square, London EC4A 3BZ, United Kingdom.  Deloitte LLP is the United
Kingdom member firm of Deloitte Touche Tohmatsu Limited ("DTTL"), a UK private
company limited by guarantee, whose member firms are legally separate and
independent entities. Please see www.deloitte.co.uk/about for a detailed
description of the legal structure of DTTL and its member firms. 
 
PART C
REPORT FROM MORGAN STANLEY AND UBS 
 
The Directors 
 
J Sainsbury plc 
 
33 Holborn 
 
London 
 
EC1N 2HT 
 
18 March 2016 
 
Dear Sirs, 
 
Offer for Home Retail Group plc ("HRG") by J Sainsbury plc ("Sainsbury's") 
 
We refer to the Revised Quantified Financial Benefits Statement, the bases of
belief thereof and the notes thereto (together, the "Statement") as set out in
Part A of Appendix 3 of this announcement, for which the Board of Directors of
Sainsbury's (the "Directors") are solely responsible under Rule 28 of the City
Code on Takeovers and Mergers (the "Code"). 
 
We have discussed the Statement (including the assumptions and sources of
information referred to therein) with the Directors and those officers and
employees of Sainsbury's who developed the underlying plans. The Statement is
subject to uncertainty as described in this announcement and our work did not
involve an independent examination of any of the financial or other
information underlying the Statement. 
 
We have relied upon the accuracy and completeness of all the financial and
other information provided to us by or on behalf of Sainsbury's, or otherwise
discussed with us, and we have assumed such accuracy and completeness for the
purposes of providing this letter. 
 
We do not express any opinion as to the achievability of the quantified
financial benefits identified by the Directors. 
 
We have also reviewed the work carried out by Deloitte LLP and have discussed
with them the opinion set out in Part B of Appendix 3 of this announcement
addressed to yourselves and ourselves on this matter. 
 
This letter is provided to you solely in connection with Rule 28.1(a)(ii) of
the Code and for no other purpose. We accept no responsibility to Sainsbury's
or its shareholders or any person other than the Directors in respect of the
contents of this letter; no person other than the Directors can rely on the
contents of this letter, and to the fullest extent permitted by law, we
exclude all liability (whether in contract, tort or otherwise) to any other
person, in respect of this letter, its contents or the work undertaken in
connection with this letter or any of the results that can be derived from
this letter or any written or oral information provided in connection with
this letter, and any such liability is expressly disclaimed except to the
extent that such liability cannot be excluded by law. 
 
On the basis of the foregoing, we consider that the Statement, for which you
as the Directors are solely responsible for purposes of Rule 28 of the Code,
has been prepared with due care and consideration. 
 
Yours faithfully, 
 
Morgan Stanley & Co. International plc and UBS Limited 
 
Appendix 4
SAINSBURY'S PROFIT Estimate 
 
1.         Sainsbury's Profit Estimate 
 
The Sainsbury's Group made a statement at the time of its second quarter
trading statement for the 16 weeks to 26 September 2015, announced on 30
September 2015, that should current market trends continue, it expected its
full year (that is, for the 52 weeks ended 12 March 2016 ("FY 2016"))
underlying profit before tax (defined as profit before tax before any profit
or loss on the disposal of properties, investment property fair value
movements, retailing financing fair value movements, IAS 19 pension financing
element and defined benefit pension scheme expenses, acquisition adjustments
and one-off items that are material and infrequent in nature, but after the
coupons on the perpetual subordinated capital securities and perpetual
subordinated convertible bonds) ("UPBT") to be moderately ahead of its
published consensus profit (which, at the time of such announcement, was £548
million) (the "Sainsbury's Profit Estimate"). 
 
The above statement constitutes a profit estimate for the purposes of Rule 28
of the Takeover Code. 
 
An estimate has been made of UPBT rather than profit before tax because, in
the view of the Sainsbury's Directors, UPBT is a key metric that provides a
clear and consistent presentation of the underlying results of Sainsbury's
ongoing business for shareholders and investors. 
 
2.         Basis of Preparation 
 
The Sainsbury's Directors confirm that the Sainsbury's Profit Estimate has
been properly compiled on the basis stated below and on a basis consistent
with the accounting policies of Sainsbury's, which are in accordance with IFRS
and are those which Sainsbury's is applying in preparing its financial
statements for FY 2016. 
 
The Sainsbury's Directors prepared the Sainsbury's Profit Estimate on the
basis of the published unaudited interim financial statements for the 28 weeks
ended 26 September 2015, the unaudited management accounts of the Sainsbury's
Group for the 20 weeks ended 13 February 2016 and a forecast for the four
weeks ended 12 March 2016. 
 
The Sainsbury's Profit Estimate excludes the costs and ongoing impact of the
Offer. 
 
3.         Sainsbury's Directors' confirmation 
 
The Sainsbury's Directors have considered the Sainsbury's Profit Estimate and
confirm that it remains valid as at the date of this announcement and that it
has been properly compiled on the basis set out above and that the basis of
the accounting used is consistent with Sainsbury's accounting policies. 
 
Appendix 5
DEFINITIONS 
 
The following definitions apply throughout this announcement unless the
context otherwise requires: 
 
 "2006 Act"                                                the Companies Act 2006, as amended from time to time                                                                                                                                                                                                            
 "2015 Annual Report and Accounts of HRG"                  the annual report and audited accounts of the HRG Group for the 52-week period ended 28 February 2015                                                                                                                                                           
 "2015 Annual Report and Accounts of Sainsbury's"          the annual report and audited accounts of the Sainsbury's Group for the 52-week period ended 14 March 2015                                                                                                                                                      
 "Acquisition"                                             the proposed acquisition by Sainsbury's of the entire issued and to be issued share capital of HRG by means of an Offer or a Scheme                                                                                                                             
 "Additional HRG Payment"                                  2.8 penceper HRG Share proposed to be paid to HRG Shareholders in lieu of a final dividend in respect of HRG's financial year ended 27 February 2016                                                                                                            
 "Admission"                                               the admission of the New Sainsbury's Shares by the FCA to the Official List and to trading on the London Stock Exchange's main market for listed securities                                                                                                     
 "Agreed Terms Announcement"                               the announcement by Sainsbury's and HRG under Rule 2.4 of the Takeover Code on 2 February 2016 setting out the key financial terms of a possible offer for HRG                                                                                                  
 "Amendment and Restatement Agreement"                     the amendment and restatement agreement dated 18 March 2016 between, amongst others, Sainsbury's and the lenders set out therein making certain amendments to the existing facility agreement dated 5 May 2015, as described in paragraph 7 of this announcement 
 "associated undertaking"                                  shall be construed in accordance with paragraph 19 of Schedule 6 to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410) but for this purpose ignoring paragraph 19(1)(b) of Schedule 6 to those regulations)  
 "Authorisations"                                          authorisations, orders, grants, recognitions, confirmations, consents, licences, clearances, certificates, permissions or approvals                                                                                                                             
 "Board"                                                   the board of directors of a company                                                                                                                                                                                                                             
 "Business Day"                                            a day, not being a public holiday, Saturday or Sunday, on which clearing banks in London are open for normal business                                                                                                                                           
 "Closing Price"                                           the closing middle market price of a share as derived from the Daily Official List on any particular date                                                                                                                                                       
 "CMA"                                                     Competition and Markets Authority of the UK                                                                                                                                                                                                                     
 "Combined Group"                                          the enlarged group following Completion of the Offer, comprising the HRG Group and the Sainsbury's Group                                                                                                                                                        
 "Completion"                                              the Offer having been declared or having become unconditional in all respects in accordance with the requirements of the Takeover Code, or if the Acquisition is implemented by way of a Scheme (and subsequent steps contemplated by the Scheme), the Scheme   
                                                           having become effective pursuant to its terms and the New TopCo Reduction Court Order having been registered with the Registrar of Companies                                                                                                                    
 "Conditions"                                              the conditions of the Offer, as set out in Appendix 1 to this announcement and to be set out in the Offer Document                                                                                                                                              
 "Confidentiality Agreement"                               the confidentiality agreement dated 3 February 2016 between Sainsbury's and HRG, as described in paragraph 13 of this announcement                                                                                                                              
 "Court"                                                   the High Court of Justice in England and Wales                                                                                                                                                                                                                  
 "Daily Official List"                                     means the daily official list of the London Stock Exchange                                                                                                                                                                                                      
 "Dealing Disclosure"                                      an announcement pursuant to Rule 8 of the Takeover Code containing details of dealings in interests in relevant securities of a party to an offer                                                                                                               
 "Deloitte"                                                Deloitte LLP                                                                                                                                                                                                                                                    
 "Disclosure and Transparency Rules"                       the Disclosure and Transparency Rules of the FCA in its capacity as the UKLA under FSMA and contained in the UKLA's publication of the same name                                                                                                                
 "EBITDA"                                                  earnings before interest, tax, depreciation and amortisation                                                                                                                                                                                                    
 "Euroclear"                                               Euroclear UK & Ireland Limited                                                                                                                                                                                                                                  
 "Exchange Ratio"                                          0.321 Sainsbury's Shares for each HRG Share held                                                                                                                                                                                                                
 "Existing Sainsbury's Shares"                             the Sainsbury's Shares in issue as the date of this announcement                                                                                                                                                                                                
 "Fairly Disclosed"                                        the information which has been fairly disclosed by or on behalf of HRG: (i) prior to the date of this announcement by or on behalf of HRG to Sainsbury's or Sainsbury's financial, accounting, tax or legal advisers (specifically as Sainsbury's advisers in   
                                                           relation to the Offer); (ii) in the 2015 Annual Report and Accounts of HRG; (iii) in the circular dated 2 February 2016 published by HRG in connection with the Homebase Sale; (iv) in a public announcement made in accordance with the Disclosure Rules and   
                                                           Transparency Rules by HRG after 28 February 2015 and prior to the date of this announcement; or (v) in this announcement                                                                                                                                        
 "FCA" or "Financial Conduct Authority"                    Financial Conduct Authority or its successor from time to time                                                                                                                                                                                                  
 "FCA Handbook"                                            the FCA's Handbook of rules and guidance as amended from time to time                                                                                                                                                                                           
 "First Closing Date"                                      the first closing date of the Offer, to be set out in the Offer Document                                                                                                                                                                                        
 "Form of Acceptance"                                      the Form of Acceptance, Authority and Election for use by HRG Shareholders in connection with the Offer                                                                                                                                                         
 "FSMA"                                                    the Financial Services and Markets Act 2000 (as amended from time to time)                                                                                                                                                                                      
 "GFSC"                                                    the Guernsey Financial Services Commission                                                                                            

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