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LONDON, Feb 19 (Reuters) - South African-based furnitureretailer Steinhoff International has made a rival offer to buy Britain's Home Retail,the owner of the Argos group of catalogue-based stores whichagreed earlier this month to be bought by supermarkets groupSainsbury's.
Steinhoff, which makes furniture mostly in developingcountries and retails its products in Europe, said on Friday ithad made a proposal to the Home Retail board which if acceptedwould give shareholders 147.2 pence in cash plus 27.8 pence in capital return and dividend payments before completion.
Steinhoff said it was supportive of Home Retail's decisionto sell its Homebase chain to Wesfarmers Ltd, a movethat would return 200 million pounds ($287 million) to HomeRetail shareholders.
Home Retail said it was reviewing the proposal and urged itsshareholders to take no further action.
Steinhoff's offer comes at a time when Britain's grocerysector has been hammered by the growth of discount groupsincluding Germany's Aldi and Lidl and byonline competition.
Home Retail had previously said it was willing to recommendthe Sainsbury's bid of 161.3 pence per Home Retail share,valuing the firm at 1.3 billion pounds ($1.87 billion).
A combination of Home Retail and Sainsbury was expected tocreate the country's largest general merchandise retailbusiness.
The acquisition is a response to intense competition betweenBritish supermarket groups and makes Sainsbury's the secondlargest player in the sector, less reliant on a food marketshowing little growth.
Combining Sainsbury's and Home Retail's Argos will forge agroup offering over 100,000 products from 2,000 stores, biggerthan the UK clothing and general merchandise business of Tesco, Britain's biggest retailer, John Lewis, Marks& Spencer and Amazon, which is fast expandinginto the UK grocery market. ($1 = 0.6965 pounds) (Reporting by Kate Holton and Vidya L Nathan; Editing by GregMahlich)
