Sainsbury’s said the takeover would boost earnings per share (EPS) in the first full year following completion, rising to over 10 percent in the third year.

The British Supermarket Sainsbury’s (SBRY.L) has agreed to buy Argos Home Retail (HOME.L) for £1.3bn, creating a group bigger than Britain’s biggest retailer, Tesco (TSCO.L).

Purchasing Argos will allow Sainsbury’s to widen its range of non-food products such as toys and electronics. Important in a market where the grocery sector is being hammered by the growth of discount groups such as Germany’ Aldi and Lidl.

Analysts have not been so optimistic, fearing that Sainsbury’s will focus too much on the merger, when the supermarket sector is already under pressure.

Head of equities research at Hargreaves Lansdown, Steve Clayton, has described the offer as “bold play”. He commented;

“It is looking to buy a struggling business when the supermarket itself is fighting strong headwinds,”

Sainsbury’s have said that the takeover will boost the earnings per share in the first year, which will then rise to over 10% by the third year.