Wesfarmers has confirmed a conditional offer to acquire the Homebase home improvement store chain for $700 million, as part of plans to bring the Bunnings brand to the UK.
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Home Retail Chief Executive John Walden said a sale represented good value for shareholders as it would come about a year into a three-year improvement plan for the chain, which trails Kingfisher’s B&Q and Travis Perkins’ Wickes in the British DIY market.
The Australian company, which owns Coles supermarkets, is close to agreeing to pay about £350 million pounds ($800 million) for Homebase.
Home Retail considered selling Homebase in 2014, but decided instead to shrink the number of stores by a quarter while it focused on Argos, which contributed about six times as much operating profit as Homebase in its 2015 financial year.
However, Wesfarmers said there is no certainty its offer will result in a transaction.
Recently, Slater & Gordon (ASX: SGH) was beset by accounting woes and regulatory changes there, and National Australia Bank (ASX: NAB) is in the process of separating its UK-based Clydesdale Bank.
The Perth company – which owns Coles, Bunnings and Target – said it had signed an exclusivity agreement with Home Retail in early December after talks began in September.
Homebase is owned by Home Retail Group which is listed on the London Stock Exchange.
Wesfarmers shares were down 1.7 per cent to $39.27 near the end of trade on the Australian market, matching a decline by main rival Woolworths and the broader market.
Due diligence has been completed and transaction papers for the proposed acquisition are being finalised.
The parent company also said it would charge Homebase about £70m ($145.2m) in 2016. Home Retail and Wesfarmers said there was no guarantee it would conclude.
Home Retail Group rejected the supermarket’s first offer as it undervalued the company, and has been supported by some top shareholders who have called for more money.
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