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Former Comet owner plots Homebase rescue

Homebase new store

OpCapita, the former owner of the electrical goods retailer Comet which collapsed in 2012 after just 11 months of their ownership, is believed to be among a pack of prospective buyers of the stricken Home Improvement chain Homebase.

Sky News has learnt that OpCapita has tabled a formal offer for Homebase, which has been put up for sale by its Australian owner Wesfarmers just two years after it bought the 250 store chain for £340m from Home Retail Group.

It was unclear on Wednesday how seriously Opcapita - set up by the City financier Henry Jackson - is approaching its bid for the DIY chain. Its presence in the auction is, however, likely to stir emotions among those angered by its brief ownership of Comet in 2012, when it recouped tens of millions of pounds even as taxpayers were saddled with a £70m bill.

Read OpCapita's version of the Comet story here.

Opcapita currently owns a portfolio of businesses across Europe, including the Football Pools, which it acquired in June 2017.

It is understood to be one of several bidders for Homebase which have been tempted by Wesfarmers's offer of a huge £100m+ dowry to take the struggling business off their hands.

Homebase, which trades from 250 stores across the UK and Ireland and employs 12,000 staff is expected to lose as much as £170m in their current financial year on revenues of roughly £1bn, down from just over £1.5bn only 3 years ago.

The company restructuring specialists Alvarez & Marsal, have been drafted in to advise Wesfarmers on options for the sale, including a mechanism that would see it close tens of Homebase outlets. Investment bankers at Lazard are handling the sale discussions, with turnaround investors such as Endless and Alteri Investors reportedly interested in a takeover.

The move to unwind Wesfarmers' takeover of the UK's second-biggest DIY chain comes a month before the Sydney-listed company has said it will update investors on the results of its strategic review of Homebase.

However, Wesfarmers' strategy has backfired spectacularly in the last 12 months‎, forcing it to write off more than £500m after a catalogue of self inflicted errors.

Read more here - 100 Days to Save Homebase

Insight & Analysis - Steve Collinge

It now looks likely that Homebase will be sold to a private equity business intent on turning around their performance, as opposed to an established Home Improvement retailer or discounter. However you look at it, this is unlikely to be good news for either the Homebase brand or the 12,000 people employed by the company. 

Ironically, the performance of the BUKI business over the last four weeks since the improvement in the weather, will I am sure have surprised the senior Wesfarmers team. They are a business who would be surprised in equal measure by both the troughs of the winter months and the seasonal peak of sales performance driven by the idiosyncrasies of the UK weather. Unfortunately, this is unlikely to have given Rob Scott any second thoughts on whether they should sell the business, as too much damage has been done and Wesfarmers risks damage to their reputation if they don't make the tough decision now.

If we don't hear more beforehand, we'll know the outcome of their strategic review on Thursday 7th June, only 29 days away.

Source: Insight DIY Team, Steve Collinge and Sky News.

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09 May 2018

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