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Home Retail Group confirms Homebase sale, enabling focus on Argos transformation

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Home Retail Group today confirmed its plans to sell Homebase for £340m, in a move that will enable it to focus on transforming Argos into a digital retail leader.

The sale of £1.5bn turnover Homebase , which trades online and through 265 stores and is a Leading IRUKTop500 retailer, to Bunnings, a subsidiary of Australian group Wesfarmers, is subject to approval from Home Retail Group shareholders and banks, but comes unanimously recommended by the group’s directors.

The announcement comes days after Home Retail Group set out its strategy for Argos, an Elite retailer in the IRUK Top500, in the light of a possible sale for Homebase. The move also makes a renewed bid from Sainsbury’s for Argos more likely.

John Coombe, chairman of Home Retail Group, said: “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.”

Wesfarmers managing director Richard Goyder said the acquisition of Homebase would in the long-term complement the strong growth trajectory of the Australian and New Zealand business.

“The £38 billion UK home improvement and garden market is a large and growing market with strong fundamentals,” he said. “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 expansions into the UK and other markets.”

Commenting on the news, Jon Copestake, chief retail and consumer goods analyst at The Economist Intelligence Unit, said: “Despite the significance of a £340m deal which will transform the home improvement retail market and see Homebase outlet trading under the much less intuitive name of ‘Bunnings’ this will be seen as very much a side-show or prelude to the mooted Sainsbury’s takeover of Home Retail Group. Despite rebuffing an initial bid from Sainsbury’s many perceive the sale of Homebase as clearing the way for an improved bid given that Homebase was not seen as a significant part of the deal, with the Argos brand and footprint most coveted by Sainsbury’s.

“In isolation, however, the Bunnings/Homebase deal is interesting in itself. Wesfarmer has the opportunity to exploit a fairly generic home improvement retail offering in the UK by importing some innovations and practices from Australia that could shake things up a little. With house prices still growing, but set to moderate, Homebase also has a fairly solid base on which Wesfarmer can build. The retail brand has continued to see like to like sales rising and has become more streamlined thanks to an aggressive store closure plan that has weighed on overall sales.”

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