Bunnings' 24 UK and Ireland pilot stores will swiftly be converted back into Homebase stores following Wesfarmers withdrawal from the UK and Irish market.
The Australian DIY giant has washed its hands of the struggling UK & Irish businesses for a nominal fee - widely reported as £1.
Hilco Capital - which bought the ailing UK HMV retail business from administrators in 2013 - will buy all Homebase assets, including the brand, the store network, property and inventory. Wesfarmers will be entitled to 20% of any equity distributions from the business thanks to a value share mechanism.
Homebase: £340 million in 2016, £1 in 2018
Bunnings owner Wesfarmers bought Homebase in 2016 for £340 million and began a pilot store conversion programme to Bunnings warehouses in 2017 (see our gallery for more). After the purchase, Wesfarmers pushed through rapid and significant changes to Homebase, ditching the product mix and culling large numbers of management in a short period.
The struggling performance was compounded with a tough trading period for many UK DIY chains.
How the move will impact on the 2,000 jobs in the UK and Ireland remains to be seen, however restructing and potential store closures have been mooted by retail pundits.
Wesfarmers Managing Director Rob Scott said: “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."
"Poor execution post-acquisition"
The MD added: “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. While it is important that we learn from this experience, this should not discourage our team from being bold and diligent in pursuing opportunities to create shareholder value.
“We acknowledge the past six months have been particularly challenging for the BUKI management and our team members in the UK and Ireland and we thank them sincerely for their hard work and commitment. The operating performance of the business has improved in recent months under the new management team led by Damian McGloughlin and he will continue to lead Homebase in delivering management’s turnaround plan.
“We wish Damian and the team well during the transition and as they take the business into its next chapter under a new owner with a track record of retail turnaround in the UK.”
