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Australian DIY brand Bunnings to launch in UK after Homebase deal Australian DIY brand Bunnings to launch in UK after Homebase deal
(35 minutes later)
Wesfarmers is to invest £500m in transforming Homebase into the Bunnings brand over the next three-to-five years if shareholders approve the Australian firm’s takeover of the UK DIY chain.Wesfarmers is to invest £500m in transforming Homebase into the Bunnings brand over the next three-to-five years if shareholders approve the Australian firm’s takeover of the UK DIY chain.
Home Retail Group accepted a £340m bid for its Homebase business on Monday, paving the way for a takeover of its Argos business by Sainsbury’s. The sale of Homebase must be approved by Home Retail’s shareholders.Home Retail Group accepted a £340m bid for its Homebase business on Monday, paving the way for a takeover of its Argos business by Sainsbury’s. The sale of Homebase must be approved by Home Retail’s shareholders.
The acquisition of 265 Homebase stores would make Bunnings the second largest home improvement and garden retailer in the UK and Ireland behind B&Q.The acquisition of 265 Homebase stores would make Bunnings the second largest home improvement and garden retailer in the UK and Ireland behind B&Q.
Related: Watch out Wickes and B&Q: Bunnings is coming for your DIY customersRelated: Watch out Wickes and B&Q: Bunnings is coming for your DIY customers
Wesfarmers told investors it expected to test out its first handful of Bunnings-branded outlets in the UK within a year and it expected to improve the way it operated, cut prices, widen ranges, improve service, appeal more to tradesmen and do more online.Wesfarmers told investors it expected to test out its first handful of Bunnings-branded outlets in the UK within a year and it expected to improve the way it operated, cut prices, widen ranges, improve service, appeal more to tradesmen and do more online.
Homebase’s current management team are to be replaced by Bunnings’ staff, Peter Davis as managing director and Rodney Boys, finance director. However, it is understood that Homebase’s current chief executive, Echo Lu – who joined from Tesco less than a year ago – has been asked to stay on and help with development of the business for at a year. Homebase’s management team are to be replaced by Bunnings’ staff – Peter Davis as managing director and Rodney Boys, finance director. However, it is understood that Homebase’s current chief executive, Echo Lu – who joined from Tesco less than a year ago – has been asked to stay on and help with development of the business for at a year.
Wesfarmers’ management team told analysts the company had studied the UK market for over a year before making its move for Homebase.Wesfarmers’ management team told analysts the company had studied the UK market for over a year before making its move for Homebase.
Richard Goyder, managing director of Wesfarmers, said: “While we know this is a decent step offshore, we’ve made this decision following a lot of hard work reviewing the opportunity and assessing the market and we do this with our eyes wide open. Bunnings is well-placed to unlock value from the Homebase business and has a proven track record in delivering growth both organically and through acquisitions.”Richard Goyder, managing director of Wesfarmers, said: “While we know this is a decent step offshore, we’ve made this decision following a lot of hard work reviewing the opportunity and assessing the market and we do this with our eyes wide open. Bunnings is well-placed to unlock value from the Homebase business and has a proven track record in delivering growth both organically and through acquisitions.”
John Gillam, managing director of Melbourne-based Bunnings, said: “We have noted some commentary in the UK claiming that DIY is in decline; we could not disagree with this more. We see a huge market opportunity for good quality home improvement and garden retailing.”John Gillam, managing director of Melbourne-based Bunnings, said: “We have noted some commentary in the UK claiming that DIY is in decline; we could not disagree with this more. We see a huge market opportunity for good quality home improvement and garden retailing.”
Some analysts say the sale of Homebase increases the likelihood of Sainsbury’s returning with a new offer for Argos – the other business within Home Retail Group. The supermarket has until 2 February to say if it will up its £1bn offer which Home Retail rejected in December.Some analysts say the sale of Homebase increases the likelihood of Sainsbury’s returning with a new offer for Argos – the other business within Home Retail Group. The supermarket has until 2 February to say if it will up its £1bn offer which Home Retail rejected in December.
Jamie Merriman, an analyst at Bernstein, said a standalone Argos would struggle to lift sales at its established stores and faced increased costs from the implementation of the living wage as well as from taking on central costs currently shared with Homebase. The removal of Argos from over 100 Homebase stores would also affect sales and profits. Jamie Merriman, an analyst at Bernstein, said a standalone Argos would struggle to lift sales at its established stores and faced increased costs from the implementation of the national living wage as well as from taking on central costs currently shared with Homebase. The removal of Argos from more than 100 Homebase stores would also affect sales and profits.
She said a deal with Sainsbury’s would mean Argos stores could move into spare space in its supermarkets but she added: “We have long argued that Home Retail face significant structural challenges at Argos and that like-for-like sales growth is not ensured. We do not believe that an acquisition by Sainsbury’s would dramatically change this.”She said a deal with Sainsbury’s would mean Argos stores could move into spare space in its supermarkets but she added: “We have long argued that Home Retail face significant structural challenges at Argos and that like-for-like sales growth is not ensured. We do not believe that an acquisition by Sainsbury’s would dramatically change this.”
Home Retail last week warned that profits would be lower than expected this year after a tough Christmas for Argos. Some analysts said the poor performance made a bid from Sainsbury’s less likely. The supermarket is still trying to persuade shareholders that a bid makes sense.Home Retail last week warned that profits would be lower than expected this year after a tough Christmas for Argos. Some analysts said the poor performance made a bid from Sainsbury’s less likely. The supermarket is still trying to persuade shareholders that a bid makes sense.