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Home Retail Group looks to sell Homebase to Wesfarmers

Thursday January 14th 2016

Home Retail Group has confirmed that it is in advanced discussions for the potential sale of Homebase to Australian group Wesfarmers for 340 million.

The group said it began discussions with Wesfarmers in September with due diligence commenced under a confidentiality agreement in October, and Wesfarmers providing a firm offer letter in November.

Wesfarmers has now completed its due diligence and the parties are currently finalising transaction documentation. However, Home Retail Group said the discussions are ongoing and there is no certainty that a transaction will be agreed.

The proposed sale follows a review of Homebase by Home Retail Group in 2014 which led to the introduction of a three-year productivity plan that included improving store productivity, closing approximately 25% of the store estate, strengthening customer propositions and accelerating Homebase’s digital capabilities.

Under the terms being discussed, Wesfarmers would acquire the entire Homebase business, including all stores and dedicated distribution centres. Product brands owned by the group, such as Habitat, Schrieber and Hygena, will be excluded from the sale but licensed for use by Homebase for one year.

John Walden, chief executive of Home Retail Group, said: “This deal would represent good value for shareholders and a growth opportunity for the Homebase business and its colleagues. The sale would allow the group to focus on Argos and its transformation plan, with an improved balance sheet and financial position, which I believe represents an even greater opportunity for building long-term shareholder value.”

The deal could include a transitional services agreement being implemented over an 18-month period to transition services provided to Homebase by Home Retail Group. The retained group would continue to charge Homebase, under its new ownership, for the provision of services such as large item home delivery, call centres and information technology.

News of the potential sale follows a 22-page presentation by Sainsbury’s this week in which it set out its case for a proposed takeover of Home Retail Group. The supermarket said it was looking at its options after its initial bid for the group was rejected.