Wesfarmers, which bought Homebase two years ago, has disposed of the ailing DIY firm for just £1 following its disastrous attempt to launch Bunnings in the UK.
The Australian conglomerate will hand over the entire Homebase business, including the brand, its 250 stores and freehold property, to a company associated with Hilco Capital, which bought HMV out of administration in 2013.
It expects to book a loss of up to £230m on the much-trumpeted acquisition, which it today admitted had been “poorly” executed and “disappointing”.
The decision follows a review of the UK business in the wake of plunging sales and profits after Wesfarmers axed some of Homebase’s most popular lines.
The 24 Bunnings pilot stores it opened during the botched UK venture will “promptly” be converted back to Homebase stores, the firm said.
Current boss Damian McGloughlin, who the firm poached from B&Q last year, will continue to helm Homebase. Wesfarmers said the operating performance of the business has improved under his leadership.
It is not yet clear if Hilco will seek to close stores, but thousands of jobs are said to be at risk.
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Wesfarmers’ newly appointed managing director Rob Scott said the divestment is in “the best interests of Wesfarmers’ shareholders”, and attributed the firm’s failings to “poor execution post-acquisition” and “a deterioration in the macro environment and retail sector in the UK”.
He admitted that, while he believes Homebase to be “capable of returning to profitability over time”, further capital investment is necessary to support its 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,” he said.
Scott added that Wesfarmers must “learn from this experience”, which he acknowledged has been particularly challenging for Bunnings UK management and team members at the coalface.
Wesfarmers will be entitled to 20% of the proceeds if Hilco is later able to sell Homebase for a profit.
Commenting on the disposal, Retail Economics chief executive Richard Lim said: “The acquisition of Homebase has been an unbelievable disaster for Wesfarmers.
“Their attempts to disrupt the UK DIY market have failed after a series of woeful management decisions, clumsy execution and a misguided perception of the UK market.
“There’s no doubt that the timing has been ill-fated as the sector faces incredibly tough headwinds. Against this backdrop, the business is bleeding cash and the owners have decided enough is enough. Unfortunately, the restructuring will almost inevitably lead to store closures and more job losses on the high street.”