Private equity firms are circling the beleaguered DIY chain Homebase amid claims its Australian owner will try to sell off the £340million business just two years into its botched takeover.
Wesfarmers had intended to transform Homebase stores into Aussie favourite Bunnings after purchasing the chain in 2016, but saw its plans fall flat and losses soar.
Now private equity firms such as Hilco, Endless and Lion Capital are believed to be in competition to buy the chain, with bargain retailer B&M also eyeing the opportunity, according to the Press Association.
Private buyers are circling the beleaguered DIY chain Homebase as its Australian owner attempts to dump the £340million business
It is unclear at this stage whether any bid would be for the entirety of the business, part of it, or in B&M’s case, a chunk of Homebase’s store estate.
The buyout would spare Wesfarmers yet more fallout stemming from its haphazard takeover of the UK stores after seeing losses triple to almost £100million in the six months to December 31 last year.
When it launched in the UK, Bunnings unveiled plans to overhaul stores, hire more staff and promised to undercut competitors’ prices by 10 per cent.
But British shoppers turned their noses up at the Bunnings brand, claiming the layout was similar to a ‘jumble sale’.
In February Wesfarmers said it was considering closing up to 40 stores in the UK, putting thousands of jobs at risk, after revealing sinking losses of £97million in the first half of 2018.
The group blamed the deterioration on the ‘rapid re-positioning’ of Homebase and tough trading conditions in the UK.
Wesfarmers has brought in investment bankers from Lazard to review options as it prepares to retreat from the British business it bought in 2016, which operates about 250 stores and employs 12,000 people.
Wesfarmers had intended on transforming Homebase stores into Aussie-favourite Bunnings after purchasing the chain in 2016
Homebase was previously part of Home Retail Group, which also included Argos. This was split up when Homebase was sold to Wesfarmers and Argos was bought by Sainsbury’s.
Its troubles add to the gloom engulfing the British high street following a spate of restructuring and refinancing deals in the face of bitter trading conditions.
Rampant inflation, rising business rates and a hike in the National Living Wage have created a cocktail of pressures that have hammered margins and pushed some retailers to the brink.
Fashion retailer New Look has driven through a company voluntary arrangement, allowing it to close 60 poorly-performing stores and renegotiate rents.
Carpetright is exploring a similar restructuring strategy, while Mothercare is locked in talks with lenders as it seeks additional financing.