Homebase to be acquired by Wesfarmers
Home Retail Group has announced today that it has entered into a share purchase agreement to sell Homebase to Bunnings (UK&I) Holdings Limited, a subsidiary of Wesfarmers Limited for a cash consideration of £340m.
The disposal and capital return are conditional, amongst other things, upon the approval of shareholders. A circular containing further details of the proposed Transaction, the proposed return of capital and containing the notice convening a general meeting, will be sent to Home Retail Group shareholders as soon as practicable.
Under the share purchase agreement, Wesfarmers will acquire the entire Homebase business, including all its stores and dedicated distribution centres. Product brands owned by the Group, such as Habitat, Schrieber and Hygena will be excluded from the sale, but certain of these brands will be licensed for use by Homebase for one year.
Following completion of the Transaction, after payments totalling £50m to the Home Retail Group Pension Scheme, and the payment of transaction, separation and restructuring costs of approximately £75m, it is the Company's intention to return substantially all of the net proceeds of approximately £200m to shareholders.
The directors of Home Retail Group have unanimously agreed to recommend the Transaction and each director has given an irrevocable undertaking that they will vote their own shares in favour of the Transaction.
The disposal and capital return are conditional, amongst other things, upon the approval of shareholders. A circular containing further details of the proposed Transaction, the proposed return of capital and containing the notice convening a general meeting will be sent to Home Retail Group shareholders as soon as practicable.
Background to and Reasons for the Transaction
The proposed sale of Homebase follows from a review of the business in 2014, initiated by the Board and the Group's then-new chief executive, who introduced a 3-year Productivity Plan that included improving store productivity, closing approximately 25% of the store estate, strengthening customer propositions and accelerating Homebase's digital capabilities. Significant progress has been made against the Productivity Plan since then, including the substantial completion of the programme to close underperforming stores, promotion and range improvements to drive positive trade, significant growth in digital sales, and an energised new leadership. Homebase is on track to become a smaller, stronger business which is better positioned to support future investment and realise its potential for greater growth.
Home Retail Group and Wesfarmers began discussions in September, due diligence commenced under a confidentiality agreement in October, and Wesfarmers provided the Group with a firm offer letter in November.
The Board is cognisant of the value created in Homebase over a short period through the successful progress on the Productivity Plan, as well as the investment, management attention and other resources required to help grow Homebase further. Additionally, the Board continues to believe that the Argos Transformation Plan is the Group's greatest potential source of shareholder value, and its successful execution will require focus and resources. The Productivity Plan preserved the option to sell Homebase in the event that circumstances proved appropriate.
“John Coombe, Chairman of Home Retail Group, said: we are very pleased to have reached agreement with Wesfarmers regarding the sale of Homebase. We believe 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. This Transaction crystallises value for our shareholders from our ownership of Homebase and specifically the work that we have been doing through the Productivity Plan. Following completion of this Transaction, the Board will remain focused on the continuing transformation of our Argos business and the options for delivering shareholder value, supported by a strong overall financial position.”