Homebase sold for £1 as Australian owner takes £230m hit from ‘disappointing’ investment

Wesfarmers tried to rebrand the chain as Bunnings but it did not take off (Reuters)

Homebase has been sold for £1 after Australian group Wesfarmers said its purchase of the group two years ago had proved “disappointing”.

The DIY chain is being sold to restructuring firm Hilco Capital, which previously bought HMV from its administrators in 2013. The firm said it would take a hit of up to £230m this year because of the disposal.

Wesfarmers bought Homebase for £340m in 2016, and originally aimed to rebrand the business as Bunnings, which is the name of the firm’s Australian DIY chain. The 24 Bunnings pilot stores will revert to the Homebase brand “promptly” after the deal completes, which is expected to happen by the end of the month.

However, the acquisition was not a success. Earlier this year Wesfarmers said it was considering closing up to 40 UK stores, with heavy losses expected.

Wesfarmers managing director Rob Scott said disposing of the UK chain was in the best interests of shareholders, following a review of the 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 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.

“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.”

Mr Scott said the board acknowledged that the past six months “have been particularly challenging” for the Bunnings UK and Ireland management and team members.

“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,” Mr Scott added.

“We wish Damian and the team well during the transition and as they take the business into its next chapter under a new owner with a track record of retail turnaround in the UK.”