- Wesfarmers is selling the UK-based hardware chain in purchased in 2016.
- The company will book a $350 million – $400 million writedown on the “disappointing” investment.
Wesfarmers has called time on its UK hardware experiment, announcing today that it will sell the Homebase business.
The company purchased the Homebase chain of stores in January 2016 for around $A705 million.
It planned to re-brand Homebase as Bunnings as part of a strategy to expand its ultra-successful Australia hardware brand offshore.
But the UK business struggled to take off, and Wesfarmers put the struggles down to poor execution and a weak macro environment as retail sales slumped in the UK.
That was reflected by a $795 million write-down of the Homebase acquisition on Wesfarmers’ books in February this year.
The Homebase chain of stores is being sold to a company associated with Hilco Capital, which specialises in distress investments and corporate restructures.
The sale will comprise all of the Homebase assets, including its brand, store network and inventory. The 24 Bunnings pilot stores in the UK will be converted back to Homebase stores following the transaction.
As a result of the sale, Wesfarmers said it would book a write-down of between £200-£230 million ($A350-$A405 million) in its accounts for the 2018 financial year.
“The investment has been disappointing,” Wesfamers Managing Director Rob Scott said. “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.”
“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 said.
“While the review confirmed the business is capable of returning to profitability over time, further capital investment is necessary to support the turnaround.”
Scott said that the costs associated with additional investment outweighed the potential benefits for Wesfarmers at this stage.
A short time ago, Wesfarmers shares were trading slightly higher for the session and holding above $45.
Scott added: “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.”
The sale follows Wesfarmers’ announcement in March that it plans to spin off Coles into a separate listed entity in order to free up capital for more high-growth investment opportunities.
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