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Sainsbury’s has agreed to sell Argos for at least £120 million to a firm headed by retail veterans, 10 years after it bought the chain for £1.4 billion.

The supermarket giant said the deal will see Swift Partners – a new company set up by retail experts including former Co-operative Group boss Richard Pennycook – buy the entire Argos business, including its 201 standalone shops and 466 stores within Sainsbury’s supermarkets, as well as more than a further 450 collection points.

Swift will also buy the Habitat brand, as well as a distribution centre in Daventry and sourcing offices in Shanghai and Hong Kong, as part of the deal.

All 1,400 staff working within the Argos business will transfer to Swift, Sainsbury’s said.

The move will allow Sainsbury’s to focus on its core food and grocery operations, but the deal means it will sell Argos for a fraction of the £1.4 billion it paid for the high street retailer in 2016.

Sainsbury’s chief executive Simon Roberts said the sale follows “many months” of discussions with Swift Partners – a firm set up by Mr Pennycook and former Morrisons chief operating officer Trevor Strain, and backed by Matt Truman and his retail investment and advisory firm, True Capital.

The deal also comes after it emerged in September last year that Sainsbury’s had held talks to sell Argos to Chinese e-commerce giant JD.com, though the discussions swiftly collapsed.

Sainsbury’s will get cash proceeds of at least £120 million, with a £70 million up-front payment when the deal completes, which is expected in February next year, with a full separation of the Argos business by 2029.

It will also receive ongoing income under long-term commercial agreements related to the stores-within-stores and Nectar loyalty card programme.

Mr Roberts, chief executive of Sainsbury’s, said: “Swift brings retail leadership, operational expertise, technology capability and long-term investment, alongside a deep commitment and belief in the future potential for Argos customers and colleagues.

“Richard, Trevor and Matt understand and value the Argos brand, share our values and will accelerate Argos’s transformation through their dedicated expertise and long-term investment.”

He added it was “business as usual” for Argos workers and customers while they work to finalise the deal.

Mr Pennycook will act as executive chairman of Argos following the acquisition, dedicating three days a week to the business, while Mr Strain and Mr Truman will serve on the Argos board.

Mr Pennycook said the group would look to potentially open some new standalone stores across the UK where there is no presence or where it cannot open within a Sainsbury’s.

He said he was also looking at whether to bring back the once much-loved Argos catalogue, but said the brand needs to be “relevant to the needs of customers today”.

He added: “We see clear potential to strengthen Argos’s customer proposition, digital capabilities and nationwide reach.”

Sainsbury’s bought Argos owner Home Retail Group, including its other brands such as Homebase and Habitat, in 2016. At the time, Argos had some 845 standalone stores.

But many of these have since been shut and sales at the chain have flagged in recent years, with Sainsbury’s struggling to return the brand to growth despite turnaround efforts.

Bally Auluk, national officer at retail trade union Usdaw, said: “We recognise this announcement will create uncertainty for those affected, and we will provide support, advice and representation throughout the process.”

“We welcome the commitment to keeping the model of store in stores, standalone stores and local fulfilment centres and that any changes will be handled fairly, transparently and in consultation with employees and their union representatives,” he added.