An anonymous venture capital firm is expected to put an end to Sainsbury's last three fraught months with a bid ranging from £900m to £1.1bn for Homebase. The second largest UK home improvements business has been on the market since August, in an attempt to boost the ailing fortunes of the leading supermarket group, and the current negotiations are certainly the most promising following weeks of speculation.

The auction held this weekend witnessed the drop out of Duke Street Capital from the bidding and attention immediately turned to the joint venture proposed by French DIY group Leroy Merlin. The latter's bid was swiftly outdone however, by the un-named company, which analysts have speculated to be ABN Amro Capital, Charterhouse Development Capital or Kohlberg Kravis Roberts, the latter two having already been involved in earlier bidding.

Sainsbury is expected to retain an equity stake in Homebase, which it hoped would raise up to £1.2bn, but the supermarket group stressed that it required a significant investment of around £300m in order to compete more effectively with the market leader, B&Q. A slowdown in the DIY market in the UK has also affected previous valuations of its worth. The outcome of the negotiations is expected to be revealed by the close of 2000, certainly after the announcement of Sainsbury's interim results at the end of November.