25th May 2018 09:52
LONDON (Alliance News) - Australian retailer Wesfarmers Ltd has agreed to sell the UK and Ireland-focused DIY retailer Homebase for a "nominal" amount to Hilco Capital after it was unable to turnaround the loss-making business it acquired in 2016.
Wesfarmers - which owns the Bunnings Warehouse hardware chain - acquired Homebase from Home Retail Group PLC for GBP340.0 million in 2016. The remainder of Home Retail, primarily the Argos store chain, was later bought by supermarket chain J Sainsbury PLC for GBP1.20 billion.
The Homebase disposal - which followed a review of its Bunnings UK & Ireland business - is expected to result in a loss of between GBP200 million and GBP230 million for Wesfarmers in financial 2018.
On Friday, Wesfarmers Managing Director Rob Scott described it as a "disappointing" investment with "problems arising from poor execution post-acquisition being compounded by a deterioration in the macro environment and retail sector in the UK".
"A divestment under the agreed terms is in the best interests of Wesfarmers’ shareholders and will support the ongoing reset and repositioning of the Homebase business," Scott added.
"While the review confirmed the business is capable of returning to profitability over time," Scott continued, "further capital investment is necessary to support the turnaround. The materiality of the opportunity and risks associated with turnaround are not considered to justify the additional capital and management attention required from Bunnings and Wesfarmers."
The deal will see Wesfarmers sell the Homebase brand, its store network and property to Hilco. On completion, the 24 pilot Bunnings-branded stores in the UK and Ireland will convert to the Homebase brand.
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