Homebase, the DIY subsidiary of the Sainsbury retailing group in Britain, is taking over the Hampden Group in Belfast in a deal that values Hampden at £17.6 million sterling (€27.2 million). Hampden has the franchise for Homebase in the Republic and Northern Ireland and is already 29.2 per cent owned by the Sainsbury subsidiary.

Homebase has increased its stake in Homebase to 53.5 per cent after buying 3.7 million shares from institutional shareholders and its offer is now unconditional. The 115p sterling a share offer is a 109 per cent premium on the previous Hampden price and has been backed by the Northern Ireland group's independent directors.

Market sources say the price paid by Homebase reflects the British group's determination to get a wholly-owned presence in DIY retailing in the Republic and Northern Ireland. They added that, given the boom in the economy in the Republic - evidenced by an 18 per cent jump in Hampden's turnover in the Republic since the beginning of July - further expansion here is likely.

A Homebase spokesman said the strategy would be to develop large-scale DIY stores and pointed to Hampden's existing plans for new stores - three in the North at Sprucefield and Newtownabbey in greater Belfast and in Derry and a fourth in the Blanchardstown retail park in west Dublin.

Hampden's main competitors in the Republic are the Heiton-owned Woodies and the Grafton-owned Atlantic Homecare.

"If the North can handle 10 Homebase stores, then the Republic can handle a lot more than the three in the Dublin area," said an industry source. Hampden's profits fell last year from £2.6 million sterling to £1.5 million but the first half of 1999 has seen a strong improvement, up 10 per cent to £804,000 sterling. Apart from Homebase, which accounts for more than 81 per cent of turnover, Hampden also has a joint venture with Reid Furniture and a franchise from Allied Carpets. Homebase has not indicated what its plans are towards these other Hampden non-Homebase businesses.