Australian conglomerate Wesfarmers Limited (Wesfarmers), which owns the Bunnings chain, confirms it has made a conditional offer to acquire Homebase from Home Retail Group plc for £340m (around AUS $699m).
According to a statement released today, it emerged that Wesfarmers and Home Retail Group began discussions in September 2015 and due diligence work commenced under a confidentiality agreement in October. An exclusivity agreement was signed in early December and confirmatory due diligence has now been completed. Transaction documentation is advanced and in the process of being finalised.
However, Wesfarmers stressed there is no certainty the offer will lead to an agreed transaction and the transaction is still subject to approval by shareholders of Home Retail Group - itself the subject of a takeover bid by Sainsbury's
Headquartered in Western Australia, Wesfarmers is a diversified conglomerate with business operations covering supermarkets, hotels, department stores and home improvement, including leading Australian and New Zealand chain Bunnings, which has a turnover of AUS $9.5bn.
If Wesfarmer's bid is successful, the Australian firm plans to transform the chain into a new Bunnings-branded business in the UK over the next three to five years.
It said of the strategic rationale behind its decision to acquire Homebase that the UK home improvement and garden market is an attractive and growing market, with Homebase offering an established and scalable platform with stores that are the right size for the UK market and support warehouse merchandising and a low cost operating model.
It added that "the existing Homebase performance will be enhanced in the short-term through operational improvement", with the acquisition proving the first step in a program which would see Wesfarmers invest in the Homebase team and "reinvigorate core Homebase assets" to build the new UK-based Bunnings-branded business.
Homebase is the second largest home improvement and garden retailer in the UK and Ireland, with 265 stores and reported revenue of £1,461.2 million for the 12 months ended August 29, 2015. It is unknown what the deal would mean for the 17,000 people employed by Homebase.
Initial reaction to news of the offer has been mixed, with some suggesting that the success of home improvement and outdoor living retailer Bunnings in Australia, wouldn't necessarily translate into a competitive advantage in the UK.
Home improvement and outdoor living retailer Bunnings reported a revenue of AUS $9.5bn and earnings before interest and tax (EBIT) of A$1.1 billion in the year to June 30, 2015. Over the past 20 years, it has achieved compound sales growth of 16.1% per annum and compound EBIT growth of 20.3% per annum. It operates 338 stores in a variety of formats in Australia and New Zealand and employs 40,000 peeople.