Supermarket Sainsbury's is selling its chain of in-store pharmacies for £125 million 20 years after it first launched the business.

LloydsPharmacy owner Celesio has agreed to buy the pharmacy business, taking on up to 2,500 staff currently employed in the chain.

Sainsbury's first launched its in-house pharmacy business in 1995.

The deal will see all of the pharmacies - including 277 in-store and four run within hospitals - rebranded as LloydsPharmacy.

LloydsPharmacy is the UK's second biggest retail pharmacy with more than 1,500 stores and over 17,000 staff.

As part of the deal, it will also pay Sainsbury's rent each year for the pharmacy store space.

Mike Coupe, chief executive of Sainsbury's, said: "Pharmacy services are incredibly popular with Sainsbury's customers and we are delighted to be teaming up with LloydsPharmacy to develop our offer.

"Working together with a specialist operator like LloydsPharmacy will enable us to grow and extend our pharmacy services to customers, whilst realising value for shareholders today from the pharmacy business we have grown organically over the last 20 years."

The deal is expected to complete by the end of February next year, although it is thought there may be competition concerns over a handful of the sites being bought by LloydsPharmacy.

Cormac Tobin, managing director of LloydsPharmacy and Celesio UK, said: "Sainsbury's is a fantastic fit for LloydsPharmacy."

"Health is our focus and over recent years we have developed a range of services to make it easier for people to manage their health, such as our pain management and skin health services, and we look forward to making these even more accessible via the Sainsbury's network," he added.

Mr Coupe has been streamlining the business and looking to make the most of the chain's store space since taking over from long-standing predecessor Justin King last July.

Sainsbury's is opening 10 Argos concession stores after finding last year that a quarter of its shops have under-used space, while it also plans to expand its non-food offer.

Mr Coupe is also leading a fight back amid a fierce supermarket price war as discounters Aldi and Lidl have been stealing market share from the major players.

Figures from Kantar Worldpanel yesterday revealed Sainsbury's saw its sales fall 0.3% during the 12 weeks to July 19, but still reclaimed its position as the UK's second largest grocer for the first time since January from Asda.

The report said Sainsbury's market share dipped from 16.6% to 16.5% in the period.

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