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Wesfarmers seeking fast-track exit from UK & Ireland

Bunnings Exit

According to Sky News, prospective buyers interested in bidding for the stricken Homebase chain, are to submit their initial offers by the end of today, Monday 23rd April.

Sources close to Wesfarmers say they are now so desperate to get out of their bungled UK acquisition, they're putting together a financial incentive package (otherwise known as a dowry), which could be worth as much as £100m, to help a new owner manage their way through the huge losses.

Homebase currently employs almost 12,000 staff and trades from just under 250 stores in the UK and Ireland and is expected to lose between £160m and £180m during the current financial year ending 30th June 2018. However, with the damage done to the Homebase business in the last two years, even an incentive of that size, is unlikely to attract a business that will want to invest long term in the Homebase brand.

Sky News have revealed that the restructuring specialists Alvarez & Marsal, have been appointed to advise Wesfarmers on alternatives to a sale, including a mechanism that would see it closing scores of Homebase stores.

In February, Wesfarmers announced a plan to close up to 40 Homebase stores:-

Read - Wesfarmers could close up to 40 stores.

However, since then only two stores have been notified of closure, Colcester and Lincoln.

Read - Homebase Lincoln faces the Bunnings axe.

Investment bankers at Lazard are now handling the sale discussions, with turnaround investors Endless and Hilco reportedly interested in a takeover. ‎Lazards involvement in the review of options for Homebase is notable because of its role in Wesfarmers' original purchase of the chain in 2016 - oh how we would love to see a copy of that document and the arguments put forward for the initial purchase!

In their Q2 update, BUKI performance was dire, with sales in the six month period to 31st December 2017, reaching just £875m, down from £1.038Bn the year before, a 15.7% decline. This fall off in sales contributed to a whopping £97m loss in the period. 

Read - Wesfarmers admit Homebase disaster and prepare way for UK&I exit.

Wesfarmers began approaching potential buyers of Homebase some weeks ago, following a disastrous January to March sales period, during which bad weather in the UK and Ireland killed off any remaining appetite Wesfarmers may have had for putting up a fight.

Read - Buyers begin to circle Homebase.

The news that Wesfarmers is seeking a fast-track exit from the UK and Ireland, comes in the same week they are due to update investors on their Q3 performance, this Thursday. Here at Insight DIY, we're expecting BUKI Q3 sales decline to have been even worse, probably in the region of a 20-25% decline, dragging the overall profit numbers even lower.

In February Rob Scott, Wesfarmers CEO, was honest enough to admit that the problems with Homebase were almost all self-inflicted, more details on which are covered in the article below by our Managing Director Steve Collinge.

Read - 100 Days to save Homebase

Source: Insight DIY Team

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23 April 2018

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