Around £500million will be invested into the re-branded Bunnings business
Western Australian conglomerate Wesfarmers has acquired Homebase for £340million, with the deal expected to complete in the first quarter of 2016.
It follows the announcement that a conditional offer had been made on January 14, 2016 to acquire Homebase, which is the second largest home improvement and garden retailer in the UK and Ireland.
Homebase has a revenue of £1,461 million and 265 stores which will be rebranded as Bunnings, the Australian and New Zealand-based home improvement retail business, over the next three to five years.
Bunnings has 338 stores in Australia and New Zealand, employs 40,000 staff, and has a turnover of A$9.5billion. Over the past 20 years, it has achieved compound sales growth of 16.1% per annum and compound EBIT growth of 20.3%.
Wesfarmers cited its rationale for acquisition, stating the £38billion UK home improvement market is attractive and growing, and that it would be a first step to reinvigorate the business.
Managing director of Wesfarmers Richard Goyder said the acquisition of Homebase provided a long-term value opportunity for Bunnings, to complement its Australian and New Zealand business.
He commented: “Bunnings is well-placed to unlock value from the Homebase business and has a proven track record in delivering growth both organically and through acquisition. Our offer provides significant execution certainty and an attractive cash consideration to Home Retail Group shareholders.
“The £38billion UK home improvement and garden market is a large and growing market with strong fundamentals. The opportunity to enter this attractive market through the acquisition of Homebase has been comprehensively researched and carefully considered by Wesfarmers and Bunnings.
“The Bunnings team has done a lot of work to make sure it understands the market and the opportunity, including having visited hundreds of stores, spending significant time researching the market and closely studying international retail expansion into the UK and other markets. Detailed due diligence has been completed and implementation and improvement planning is well advanced.”
Bunnings managing director John Gillam commented: “The acquisition is the first step in building a further growth platform for Bunnings with additional planned investment of approximately £500million in the Homebase team and assets to build a new Bunnings-branded business over three to five years. We will combine essential local elements with the best of Bunnings to bring customers in the UK and Ireland and Exciting new home improvement and garden offer.”
Following the sale completion, Bunnings will have a revised management structure to implement the Homebase acquisition plans. Incumbent managing director John Gillam will become chief executive officer of Bunnings, with Peter Davis and Rodney Boys named managing director and finance director, respectively, of Bunnings UK and Ireland.