Homebase is the second largest home improvement and garden retailer in the United Kingdom, with 265 stores across the United Kingdom and Ireland.
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It a trading statement for the 18 weeks from 30th August 2015 to 2nd January 2016, John Walden, chief executive of Home Retail Group, comments: “Against this backdrop, whilst Argos trading performance was mixed, I am pleased that we made material steps forward in the Argos Transformation Plan”.
An Australian retail giant is in advanced talks to buy Homebase, the DIY chain, in a deal that could smooth a path towards a separate takeover involving Argos and J Sainsbury. The Homebase Productivity Plan, which includes an aggressive store closure program, overhead reductions and customer proposition improvements, has begun to position Homebase as a smaller, higher quality and more efficient business.
Wesfarmers said it would rebadge the British stores as Bunnings but whether their stock will closely replicate the model in Australia remains to be seen.
Wesfarmers said it started talks with Home Retail Group in September and launched due diligence, a close look at the target’s books, in October.
Sainsbury’s said earlier this month it had made an approach to buy the whole of Home Retail in November, but its interest lies mainly in its bigger Argos general merchandise business, according to the rationale it published earlier on Wednesday.
Lazard is acting as Wesfarmers’ financial adviser in the planned acquisition, which is subject to approval by Home Retail Group and other conditions which Wesfarmers declined to specify.
News of the potential sale follows the release of a 22-page presentation by Sainsbury’s earlier this week in which it set out its case for the proposed takeover of Home Retail saying it was a “strategically compelling” deal that would create a leading multi-channel retailer for food and non-food products.
The supermarket chain has been given a deadline of February 2 to make a formal offer for Home Retail, although a number of its own shareholders have questioned the logic of a tie-up given the structural challenges facing both chains. In a statement the group said: “The UK home improvement and garden market is an attractive and growing market”.
Shares in Home Retail rose almost 5% on Wednesday to 148p on improved hopes for a Sainsbury’s deal while the supermarket’s shares slipped 1.4% to 248p as investors remained sceptical about the benefits of a merger. It is the second-largest player in the sector.
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Coupe said feedback from shareholders on the potential bid for Home Retail had so far had been “very balanced” – suggesting the supermarket does not have full support for the bid.
