Manufacturing & Supply Chain

Argos owner Home Retail Group, which is being pursued by supermarket Sainsbury’s, has agreed to sell DIY chain Homebase to Australian conglomerate Wesfarmers for £340m.

The Australian supermarkets-to-industrials firm said it plans to rebrand Homebase’s 265 UK stores under the Bunnings fascia, its domestic DIY chain.

Home Retail said it expects to complete the deal, subject to shareholder approval, in the first three months of this year.

John Coombe, chairman of Home Retail, said the company believes that this is the best deal for shareholders and for the business.

“Wesfarmers is an experienced and successful retailer with exciting plans to invest in and grow their presence in the UK through Homebase,” he added.

Wesfarmers has a market valuation of almost £22 billion, and is the largest private sector employer in Australia with around 210,000 staff.

“The £38 billion UK home improvement and garden market is a large and growing market with strong fundamentals,” commented Wesfarmers managing director Richard Goyder.

“The opportunity to enter this attractive market through the acquisition of Homebase has been comprehensively researched and carefully considered by Wesfarmers and Bunnings,” he added.

Wesfarmers said it planned to spend £500m to transform the business from Homebase to Bunnings over the next three to five years.

It added that over the year to August 29, Homebase – which employs around 18,000 staff – posted sales of £1.5 billion.

Home Retail said it would return £200m from the sale to shareholders, adding that the deal would leave it free to focus on its turnaround of Argos.

The sale comes after Sainsbury’s revealed earlier this month that it made an initial approach for £1.3 billion-rated Home Retail, which was rebuffed in November.

The supermarket has until February 2 to make a formal offer for the group.

Home Retail’s chief executive John Walden added that it did not need a deal with Sainsbury’s to turn around Argos, according to weekend reports in The Sunday Times.

Sainsbury’s is understood to be keener on buying the Argos side of Home Retail.

It said a tie-up between the two firms would offer profitable sales growth, create a wider financial services business and savings by cross-selling each firm’s products and services in their stores.

Homebase was originally founded by Sainsbury’s as a joint venture with Belgian retailer GB-Inno-BM in 1979 as Sainsbury’s Homebase.

The supermarket sold the business in 2000 for £969m, splitting it between buyout firm Schroder Ventures and retail group Kingfisher.

Homebase is a British home improvement retailer and garden centre, with 323 stores across the United Kingdom and Republic of Ireland. Founded by Sainsbury’s and GB-Inno-BM in 1979, the company has been owned by Home Retail Group  since 2006.