“Struggling British retail hardware chain Homebase has been sold by its Australian owner for a nominal fee of £1.
Wesfarmers, which bought the DIY retail chain two years ago, expects to make a loss of up to £230m ($307m).
The business is being bought by restructuring specialist Hilco, which rescued music chain HMV in 2013.
It is not clear if the new owners will shut down stores, but thousands of jobs could be at risk.
Homebase currently employs 11,500 people in 251 stores across the UK.
Wesfarmers paid £340m for the DIY chain in early 2016 and has been rebranding the stores under the Bunnings name.
So far 24 stores have been rebranded, but once the deal has been completed, they will become Homebase stores again.
Richard Lim, chief executive of research consultancy Retail Economics, said Wesfarmers’ decision to buy Homebase had been an “unbelievable disaster” due to “woeful management decisions, clumsy execution and a misguided perception of the UK market”.
In February, Wesfarmers said its profits in the second half of 2017 had fallen by nearly 90% after it wrote down the value of the Homebase business by A$931m (£527m). It also warned that 40 Homebase stores could be closed.
Rob Scott, the managing director of Wesfarmers, said: “The investment has been disappointing, with the problems arising from poor execution post-acquisition being compounded by a deterioration in the macro environment and retail sector in the UK.
“While it is important that we learn from this experience, this should not discourage our team from being bold and diligent in pursuing opportunities to create shareholder value.”
In exchange for paying £1, Hilco will receive control of the entire Homebase business, including its stores, inventory, property and rental lease agreements.
Under the deal – which is expected to be completed by the end of June – Wesfarmers is allowed to take a fifth of future dividends or capital returns to shareholders, should Hilco succeed in turning around the Homebase brand.
In an analyst call, Mr Scott said that Westfarmers had carefully considered its options before deciding to sell the business.
“The evaluation confirmed that in time and through further capitalisation and restructuring, Homebase is capable of returning to profitability,” he said.
“However the materiality of the opportunity and the risks associated with the turnaround are not considered to justify the additional capital and management attention required from Bunnings and Wesfarmers.””
Source – BBC News