Following a comprehensive review of the underperforming Bunnings UK and Ireland (BUKI) business, Wesfarmers is to sell its Homebase business in the UK and Ireland to a company associated with Hilco Capital.
The sale will comprise all Homebase assets, including the Homebase brand, its store network, freehold property, property leases and inventory, for a nominal amount. The 24 Bunnings pilot stores will convert to the Homebase brand promptly following completion, and Wesfarmers will be entitled to 20% of any equity distributions from the business going forward.
Wesfarmers MD Rob Scott says: “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.
“While the review confirmed the business is capable of returning to profitability over time, 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.
“Homebase was acquired by Wesfarmers in 2016. The investment has been disappointing, with the problems arising from poor execution post-acquisition being compounded by a deterioration in the macro environment and retail sector in the UK."
Damian McGloughlin will continue to lead Homebase's turnaround plan.
Australia’s Wesfarmers acquired Homebase in 2016 for £340m. Wesfarmers expects to record a loss on disposal of £200-£230m in the group’s 2018 FY results, subject to completion and review.
The divestment is expected to complete by 30th June.