SUPERMARKET group Sainsbury is considering selling its Homebase home improvement business.

The retailer said it was in the early stages of looking at a number of "strategic alternatives" for Homebase.

Sainsbury's added that it had been in discussions with a number of parties regarding Homebase. It has been estimated that the business could fetch more than £1bn.

The announcement comes three months after chief executive Sir Peter Davis commented that Sainsbury's was focused on improving profitability in the supermarket business and would be considering alternatives for Homebase.

Potential buyers for the DIY chain are believed to include US group Home Depot and European company LeRoy Merlin.

Homebase, which opened its first store in 1981, is one of Sainsbury's strongest performing businesses and has around 12 per cent of the UK home improvement market. It ranks behind Kingfisher's B&Q, which has a 20 per cent share.

The announcement comes a month after Sainsbury posted an upbeat trading statement showing overall sales, including sales at its supermarkets and Homebase stores, up 9.2 per cent for the three months to the end of June.

Those figures came two months after the retail giant reported profits had slumped 23 per cent in the last year because of poor performance at its supermarkets.

Since then, Sainsbury's has launched a "major quality campaign" in-store, improving displays and using "naked chef" Jamie Oliver in its advertising.

The City was awash with speculation over Homebase's fate. One analyst said Homebase could be set for an alliance with UK rival Wickes.

However, this would be complicated by the stake Focus Do It All holds in Wickes, following its failed bid for the rival.

Another option could be doing a deal with B&Q, although this may raise competition issues.

Homebase has 300 stores in the UK and employs 17,000 staff.