Wesfarmers, Australia’s retail giant, has announced the purchase of UK DIY chain Homebase for AU$705 million. Known as the second-largest home improvement retailer in the UK and Ireland, Homebase is owned by Home Retail Group. Homebase in UK has 265 stores and 18,000 staff. The retail group also owns Argos retail chain.
Wesfarmers’ Bunnings is Australia’s most famous outdoor living and DIY products supplier store. Bunnings’ managing director John Gillam said the acquisition has reflected a “compelling opportunity to enter the attractive UK home improvement and garden market.”
According to him, Homebase is distinguished by its ‘scalable’ store platform with a strong penetration in high density areas. Wesfarmers has estimated that the UK’s home improvement market is in the size of AU$ 78 billion. Kingfisher’s B&Q chain is the market leader in that segment.
“We will combine essential local elements with the best of Bunnings to bring customers in the UK and Ireland an exciting new home improvement and garden offer,” added Gillam, BBC reports.
“We are very pleased to have reached agreement with Wesfarmers regarding the sale of Homebase. We believe that this is the best deal for shareholders and for the business,” said Home Retail Group chairman John Coombe.
Given Bunning’s synergy with Homebase, it is expected that substantial re-branding to extend the Bunnings banner will be in the offing. Wesfarmers also announced that 500 million pounds (AU$ 1.03 billion) would be spent on upgrading the UK stores.
The deal will be through in the next three months after getting the nod from Home Retail Group’s shareholders. In his comments, Wesfarmers Managing Director Richard Goyder told CNBC that the acquisition is “not without risk.”
“But we’ll put the grunt of Wesfarmers behind it,” he added.
Many see Wesfarmers acquisition in the UK is an index of its confidence in the DIY sector after the success of Bunnings in Australia. Its Australian DIY chain triggered a real housing boom. Value added property-focused TV shows made it grow exponentially. Bunnings commands a whopping 40 percent share in Australia’s home improvement market.
“Bunnings has staked out that territory so well to the exclusion of anyone else and the impression that they have made on the Australian psyche is that it is a default,” observed Tom Piotrowski, a market analyst at Commonwealth Securities.