What's going on?

The owner of the Argos chain of stores, Home Retail Group, saw its stock surge 13% on Monday as South Africa-based retailer Steinhoff made a bid to buy the company. It comes in the wake of a lower bid from groceries giant J Sainsbury that was made a few weeks ago.

What does this mean?

It�s reasonably likely that Sainsbury will return with an even higher bid. This is, very simply, called a �bidding war.� One wrinkle is that Steinhoff�s bid is purely in cash, while Sainsbury has offered Home Retail�s shareholders a mix of cash and stock in the new, combined company. So, to some extent, the preference of Home Retail�s shareholders will be determined by whether they want exposure to the new company � although, of course, the price will play a crucial role as well.

Why should I care?

For the stock: Home Retail stock is up 75% this year. Being the subject of a bidding war can be very profitable for one�s shareholders! The question, of course, is what happens next. If Sainsbury does return with a higher bid than Steinhoff�s, Home Retail�s stock is likely to go up further.

The bigger picture: It is Argos�s delivery platform which is so attractive. Retailers have to be able to deliver their goods directly to their customers� homes and/or offices � increasingly on the same day that the customer places their order. Sainsbury has calculated that it�s better to simply buy Argos�s delivery platform rather than build its own � although it�s unclear at what price this strategy stops making sense.