Home Retail close to £340m sale of Homebase to Australian retailer Wesfarmers

Talks revealed on day Sainsbury’s makes case for pursuing sister company Argos

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The Independent Online

Sainsbury’s attempted takeover of Home Retail Group, which owns Argos and Homebase, took an unexpected twist last night as the group revealed it was on the verge of selling its DIY chain.

Home Retail said it is finalising the sale of Homebase to the Australian retailer Wesfarmers for £340m, following discussions that started in September. Sainsbury’s wants Argos and approached the parent company in November with a bid that was rejected.

On Wednesday, Sainsbury’s laid out the reasons why a second bid could be launched imminently and the benefits to the supermarket from buying Argos. Bosses refused to discuss the future of Homebase, leading to suggestions that it would be quickly sold off if any deal was agreed, but last night’s development may make talk of the chain’s future irrelevant.

Sainsbury’s must now wait for any Homebase sale to complete before deciding whether to buy the remains of Home Retail, and at what price.

Rumours that Homebase was set to be bought started last year, with analysts valuing the firm at around £140m. Other analysts said Homebase was worthless, with profits being hit and bosses closing one in four stores to stem the losses. John Walden, Home Retail’s chief executive, said: “This deal would represent good value for shareholders and a growth opportunity for the Homebase business and its colleagues. The sale would allow the group to focus on Argos and its transformation plan, with an improved balance sheet and financial position, which I believe represents an even greater opportunity for building long-term shareholder value.”

Details of the deal show that of the £340m, about £75m would be spent on restructuring and separation costs, £50m goes into the pension fund and £200m will be returned to shareholders.

The deal will exclude the sale of Home Retail’s brands – Habitat, Schrieber and Hygena – while all Argos concessions in Homebase stores will be likely to go. Mr Walden will face further questions on Thursday when he unveils the company’s Christmas trading figures, as investors try to understand what the latest twist means for the share price and any potential bid by Sainsbury’s.

The supermarket made clear that a second approach to Home Retail would not be made at any price, but pointed out the benefits of a deal in a 22-page presentation.

Analysts warned that the details left more questions than answers, but Sainsbury’s insisted it could profit from Argos’s supply-chain network, fill excess space in its supermarkets with Argos concessions and offer click and collect in convenience stores.

Mike Coupe, Sainsbury’s chief executive, said: “We’ve looked at Home Retail Group over a number of years … [but] this is not a deal that will be done at any price.”

The grocer also said it suffered a 0.4 per cent fall in sales over Christmas as the price war continued to bite, although it said the second half of the year will now be better than the first.

Rival Morrisons surprised with a 0.2 per cent sales rise on Tuesday, while market leader Tesco reports on Thursday.