Wesfarmers has sold its embattled DIY chains Homebase and Bunnings UK to restructuring firm Hilco Capital for a nominal sum of £1.
The sale to Hilco, which owns HMV, raises questions for an unknown number of Homebase’s creditors and places the future of its 11,000-plus workers in jeopardy.
While Hilco’s plans remain unclear, due to Homebase’s ailing finances it’s expected that a company voluntary arrangement (CVA) insolvency process – which includes store closures or disposals – is likely to be an option pursued.
Wesfarmer’s UK business was put up for sale earlier this year, just two years after completing a £340 million acquisition of Homebase.
The Australian company had initially planned to use Homebase’s store portfolio to launch its Bunnings fascia and to take on the might of rival B&Q, but today it conceded that its foray in the UK was poorly executed.
The retail conglomerate’s 24 Bunnings stores in the UK will now be “promptly” converted back into Homebase stores.
According to Sky News, Hilco had edged ahead of rivals after convincing management about its restructuring and revival plan for Homebase, which is losing about £20 million a month.
Wesfarmers now expects to record a loss on the disposal of £200 million to £230 million.
The company has already been forced to write off $500 million and its acquisition of Homebase was doomed with the timing of a downturn in the UK retail sector.
Hilco is best known for its purchase of music retailer HMV in 2013 while it was in administration. It has since has revived the business, despite a reduced high street presence.
Wesfarmers chief executive Damian McGloughlin said: “We are very pleased to have reached an agreement with Hilco and this marks an exciting new chapter for Homebase.”
He added: “With Hilco’s support we have the commitment of an experienced partner, substantial additional capital, stability for the business and the opportunity to reinvigorate a brand that has been a mainstay of UK retail for over 40 years.”