Wesfarmers calls time on disastrous UK foray
Retail experts criticise group for its attempts to revive Homebase
Homebase has been sold by its Australian owner Wesfarmers for just £1 following a disastrous foray into Britain’s home improvement market.
The deal with Hilco, the retail restructuring outfit that rescued HMV, will see Wesfarmers book a loss of up to £230 million.
It is unclear at this stage if Hilco will embark on a fresh store closure programme. Several Homebase outlets have already closed in recent years.
The chain has about 250 UK stores and employs some 12,000 people.
The 24 stores that had been converted to the Bunnings brand – a staple of the Australian retail landscape – under Wesfarmers’ ownership will revert to the Homebase name.
Under the terms of the deal, Hilco will acquire all Homebase assets including the brand, its store network, freehold property, property leases and stock. 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 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.”
Wesfarmers will participate in a “value share mechanism” whereby it is entitled to 20 per cent of any future sale of the business. Homebase boss Damian Mcgloughlin said the agreement with Hilco “marks an exciting new chapter” for the retailer.
John Colley of Warwick Business School, who researches M&A and is a professor of practice in strategy, said: “This is one of the great all-time disasters in the M&A world and it is against some very stiff competition. Both the strategy and the execution were disasters.
“Assuming what works in the Australian DIY market will work in the UK with its different climate was a great leap in faith. Wesfarmers underestimated the costs of conversion to the Bunnings format, which does not seem to work.”
Richard Lim of Retail Economics 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.”
sreid@scotsman.com