Homebase sold for £1

Australian DIY chain Wesfarmers has sold the UK Homebase DIY chain for £1 to Hilco Capital after making huge losses.

“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,” said Wesfarmers managing director Rob Scott.

The deal will be completed by the end of June. All Homebase assets will be transferred to Hilco including the brand, store network, all freehold property and inventory. In addition the 24 Bunnings pilot stores will be moved over to the Homebase brand and sold too.

While the sale is for £1, Wesfarmers is entitled to 20% of any equity distributions from the business, so it can participate in any profitable divestment of the business in the long-term.

Homebase was bought from the Home Retail Group for £340 million at around the same time that Sainsbury’s bought the rest of the company (including Argos and Habitat).

Prior to the acquisition, Bunnings was planning to invest £500 million in the Homebase brand to introduce the Australian brand to the UK. Bunnings aimed to “combine essential local elements with the best of Bunnings to bring customers in the UK and Ireland an exciting new home improvement and garden offer,” said Bunnings managing director John Gillam.

Wesfarmers now expects a loss on disposal of up to £230 million in the group’s 2018 full-year financial results. “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,” said Scott.