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Homebase sold for £1

John Colley

Wesfarmers selling Homebase for £1: “This is one of the great all time disasters in the M&A world and it is against some very stiff competition. Both the strategy and the execution were disasters.” Says John Colley – Warwick Business School.

“Entering a shrinking market through a weak third position was always going to be problematic and increasingly UK households now get someone else to do their DIY, who buy materials through traditional builders merchants.

“Assuming what works in the Australian DIY market will work in the UK with its different climate was a great leap in faith. Wesfarmers underestimated the costs of conversion to the Bunnings format, which does not seem to work.

“Then they fired the top 160 managers who knew anything about the UK market and replaced them with their own limited knowledge. Finally they delisted the top selling lines.

“Ultimately they have found someone to buy it as there are over £1Bn of future lease liabilities. One suspects that their various costs and risk underwriting will cost them far more than the £340M they paid for it plus the additional £200M of provision on top of the write-off on the purchase price. One suspects the Bunnings CEO’s position may be under pressure.”

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