Parent company of Bunnings UK and Ireland (BUKI), Wesfarmers, has reportedly re-thought its $705 million acquisition of Homebase after just two years of its conversion plan, as the Australian owners look to potentially selling the operation to a UK buyer.
The news comes after an unscheduled review of the performance and strategic plans for Bunnings United Kingdom and Ireland by Wesfarmers Limited, where it advises a number of significant items that are expected to be included in the Group’s 2018 half-year (HY2018) financial results, and it was stated that BUKI is expected to report an underlying loss before interest and tax of £97 million ($165 million) for the first-half of the 2018 financial year.
Wesfarmers has now reportedly consulted with investment bank Lazard, for advice in how to move forward with the chain and take steps to provide a solution for the significant financial loss; this may include finding a buyer, or even considering a company voluntary agreement (CVA) for BUKI - which under British insolvency law allows a company to renegotiate its debts and contracts.
Former Chief Executive Officer at Wickes, Bill Grimsey told Fairfax Media: "The Homebase business is not very well positioned now. It’s overpriced and over rented in terms of the properties - all the properties are far too expensive. [Wesfarmers] have paid too much for it... they’ve arrived in England with a Bunnings format and really plonked Australia into England and that was never going to work."
"A CVA may buy them some time, but they need an expert running it," Mr Grimsey said.
Managing director of Wesfarmers, Rob Scott said in February: “We need to address underperformance in our portfolio that is detracting from positive performance in other areas, and the announcement today sets out decisive actions to achieve this.
“The Homebase acquisition has been below our expectations which is obviously disappointing. In light of this, a review of BUKI has commenced to identify the actions required to improve shareholder returns.”
Bunnings UK and Ireland refused to comment.