This article is more than 2 years old

This article is more than 2 years old

Homebase has been sold to the restructuring specialist Hilco, the owner of HMV, for £1 as the DIY chain’s Australian owner pulls the plug on its disastrous venture into the UK, putting thousands of jobs at risk.



Wesfarmers, which bought the business for £340m two years ago, said it was offloading the entire 250-store Homebase chain, which has a workforce of just over 11,000.

All 24 of the stores it rebranded to Bunnings will become Homebase again once the deal completes at the end of June. The Australian firm said it expects to make a loss of up to £230m on the disposal.

Quick guide The lowdown on Hilco Show Hide Hilco’s UK division, set up in 2000, has been involved in a long list of retail restructures from HMV and BHS to Woolworths. The company advises on valuations and helps clear stock or close stores but also invests in businesses. Hilco’s investment arm runs six British firms, including HMV, the pottery firm Denby, the boat dealership Clipper Marine and Staples' UK chain, which has been renamed Office Outlet. Hilco has rejigged and sold on businesses, including Habitat, which it sold to the former Argos owner Home Retail Group for £24m in 2011, but has also closed businesses such as Borders, the bookstore it bought in 2009. The group’s biggest deal was the acquisition of HMV out of administration in 2013, saving thousands of jobs and the music retailer now trades from 120 stores, only 20 less than were originally taken on. Hilco previously owned HMV’s Canadian business, which went bust last year. Until it bought Homebase, Hilco’s most recent deal was a management buyout of the Yorkshire-based kitchens and bathrooms supplier Moores Furniture Group late last year. In late 2016 it bought the stationery suppliers retailer Staples’ British arm, which it continues to operate under the Office Outlet brand. Sarah Butler

Industry insiders said Hilco, which has been involved in dozens of retail administrations in the UK, was likely to close up to 60 stores via a company voluntary arrangement insolvency process. Bunnings had already planned a CVA as part of a review of the business after it said it would close about 40 of its loss-making stores.

The botched Australian acquisition of Homebase is seen as one of the most disastrous ever retail takeovers, alongside Tesco’s doomed expansion into the US market with the Fresh & Easy grocery chain.

Shares in Kingfisher, the owner of the B&Q and Screwfix DIY businesses, rose by more than 4%, leading the FTSE risers, as investors bet that Homebase would downsize. Travis Perkins, the owner of the Wickes chain, was up nearly 2%.



Wesfarmers had intended to spend £500m giving the Homebase chain a facelift, turning it into a British version of its successful Australian DIY chain, Bunnings, which is famous for low prices and sausage sizzles.

‘Homebase is the most disastrous retail acquisition in the UK ever’ Read more

But in a tough UK market, where the entire DIY sector is under pressure and there is heavy competition from rivals such as B&Q, Argos, Wickes and the supermarkets, Bunnings has struggled to get a foothold and suffered heavy losses. The company was expected to make a loss of nearly £100m in the first half of this year alone.

Bunnings has admitted it made mistakes, including axing the entire Homebase senior management team as soon as it got the keys to the stores and jettisoning the large home furnishings business that had appealed to Homebase’s legion of female shoppers.

Richard Lim, the chief executive of analysis firm Retail Economics, said: “The acquisition of Homebase has been an unbelievable disaster for Wesfarmers. Their attempts to disrupt the UK DIY market have failed after a series of woeful management decisions, clumsy execution and a misguided perception of the UK market.”



Quick guide What is a company voluntary arrangement? Show Hide What is a company voluntary arrangement? A company facing financial difficulties prompted by heavy debts can apply for a company voluntary arrangement in order to avoid administration or other more disruptive forms of insolvency. It is a legally binding insolvency process in which a company cuts a deal with creditors on unsecured debts. In retail, this usually involves asking landlords of poorly performing shops to reduce rental payments or allow the company to exit leases on stores which they would otherwise be bound to for long periods. Companies hire an insolvency practitioner to assess the business and whether a CVA has a reasonable chance of success. They then produce a CVA proposal which may involve changes to the terms of leases or termination of onerous supply or employment contracts. In order for a CVA to go ahead, the company must call a meeting of unsecured creditors, which may include suppliers and landlords. For the CVA to be approved, creditors who are owed at least 75% of the company’s total unsecured debt must vote in favour. At least 50% of creditors who voted for the CVA must not be connected to the company. Once approved, the company can continue trading as usual and all unsecured creditors are bound by the deal, even those who voted against it or didn’t vote at all. Creditors are often willing to support a CVA in the hope of recovering more cash than they would if the company went into administration or liquidation. They hope that reducing debts will help create a viable company that can continue to trade and pay them. The process is popular with managers because they usually remain in charge of the company and it is cheaper than other forms of insolvency.

Michael Schneider, the Bunnings group managing director, said: “This is clearly very disappointing and is not the outcome we envisaged when we made the acquisition in 2016.”

He praised the hard work of the team in the UK and Ireland and added: “Despite some tough weather during February and March, [UK managing director Damian McGloughlin] and the team have done a really good job in the last six months and we have seen some positive outcomes from that work.”

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McGloughlin said: “We are very pleased to have reached an agreement with Hilco and this marks an exciting new chapter for Homebase. With Hilco’s support we have the commitment of an experienced partner, substantial additional capital, stability for the business and the opportunity to reinvigorate a brand that has been a mainstay of UK retail for over 40 years.”

Rob Scott, the managing director of Wesfarmers, said the company believed Bunnings could be a success in Britain but more capital was needed and the risk of such extra investment was too great.

“The investment has been disappointing, with the problems arising from poor execution post-acquisition being compounded by a deterioration in the macro environment and retail sector in the UK,” he said.

Dunelm shares fall amid weaker footfall

Shares in Dunelm fell by more than 11% on Friday after the home furnishings retailer warned of tough market conditions.

The bedding and kitchen equipment retailer said weaker footfall had dragged comparable-store sales in its fourth quarter down 4.7% so far.



A 44% rise in online sales propped up the group’s overall sales but they were still up only 0.1% in the fourth quarter to date, Dunelm said in a surprise trading update.

Shares in the company sank 11.2% to 545p in response.