Monday, 18 January 2016

Homebase to be bought by Australia's Wesfarmers for £340m

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 very much as 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. Wesfarmers 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 Wesfarmers 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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