ARGOS owner Home Retail Group, which is being pursued by supermarket Sainsbury's, has agreed to sell DIY chain Homebase to Australian conglomerate Wesfarmers for £340 million.

The Australian supermarkets-to-industrials firm said it plans to rebrand Homebase's 265 UK stores - including the store in Foss Islands Road in York - under the Bunnings fascia, its domestic DIY chain.

Home Retail said it expects to complete the deal, subject to shareholder approval, in the first three months of this year.

This time last year York's Homebase became one of eight across the country to feature an Argos "Click and Reserve" point as part of a scheme by HRG to reinvent Argos through new store formats in response to increasing non-food offerings from supermarket chains.

The insert was in addition to Argos' city centre store in Piccadilly, as well as its out of town presence at Clifton Moor and Monks Cross.

John Coombe, chairman of Home Retail, said: "We believe that this is the best deal for shareholders and for the business.

"Wesfarmers is an experienced and successful retailer with exciting plans to invest in and grow their presence in the UK through Homebase."

Sainsbury's is understood to be keener on buying the Argos side of Home Retail. It said a tie-up between the two firms would offer profitable sales growth, create a wider financial services business and savings by cross-selling each firm's products and services in their stores.

Homebase was originally founded by Sainsbury's as a joint venture with Belgian retailer GB-Inno-BM in 1979 as Sainsbury's Homebase.

The supermarket sold the business in 2000 for £969 million, splitting it between buyout firm Schroder Ventures and retail group Kingfisher.