Homebase sold and rebranded a year after closure threats

A £340m takeover by Australian company Wesfarmers was sealed this week

All 265 Homebase stores are to be rebranded Bunnings (Rex)

Homebase is set for a new lease of life, after the DIY chain’s new Australian owners promised to invest £500m in the company, a year after the current management announced that one in four stores would close.

The £340m takeover by Wesfarmers was sealed on Monday, with shareholders in the former owner, Home Retail Group, walking away with a £200m payoff.

The Homebase name will disappear, as all 265 stores are to be rebranded Bunnings, after Wesfarmers’ Australian and New Zealand DIY outfit.

It means Home Retail’s only key business is Argos – with Sainsbury’s a step nearer to making a second approach for the catalogue business. Analysts believed the deal between Home Retail and Wesfarmers would help Sainsbury’s in its Argos pursuit, especially since about £1.4bn of lease liabilities from Homebase stores are no longer on the table.

Wesfarmers said it was keen to win a slice of the £38bn UK home-improvement and garden market, even though both Homebase and rival B&Q have been struggling.

Richard Goyder, Wesfarmers’ managing director, said: “Bunnings… has done a lot of work to make sure it understands the market and the opportunity, including having visited hundreds of stores.”

Homebase’s current management are to be replaced by Bunnings lifer Peter Davis as chief executive and Rodney Boys as finance chief. The store-renaming process will take from three to five years, and Argos concessions in Homebases will be phased out over 18 months.

In October 2014, Home Retail said it would shut one in four Homebase stores after difficult trading, with 2,000 job losses. At the time John Walden, the chief executive, said he was not looking to sell, but a year later Wesfarmers approached with an offer.

It is understood that Archie Norman, the chairman of ITV who has just announced he is to step down, was instrumental in bringing the two parties together, thanks to his role on the board of Australian supermarket Coles, which is owned by Wesfarmers.

John Coombe, the chairman of Home Retail, hinted that a bid from Sainsbury’s for Argos would be welcomed: “The board will remain focused on the continuing transformation of Argos … and the options for delivering shareholder value, supported by a strong overall financial position.”