Wesfarmers Limited (ASX: WES) has entered into an agreement to acquire Homebase from Home Retail Group (LSE: HOME) for £340 million (A$705 million)¹. This follows the announcement on 14 January 2016 confirming that a conditional offer had been made to acquire Homebase. Homebase is the second largest home improvement and garden retailer in the United Kingdom (UK) and Ireland. Homebase reported revenue of £1,461.2 million for the 12 months ended 29 August 2015 and currently has 265 stores.
Wesfarmers Managing Director Richard Goyder said the acquisition of Homebase provides a long-term value creation opportunity for Bunnings which will complement the strong growth trajectory of the Australian and New Zealand business.
“Bunnings is well placed to unlock value from the Homebase business and has a proven track record in delivering growth both organically and through acquisition,” Mr Goyder said. “Our offer provides significant execution certainty and an attractive cash consideration to Home Retail Group shareholders.
“The £38 billion UK home improvement and garden market is a large and growing market with strong fundamentals. The opportunity to enter this attractive market through the acquisition of Homebase has been comprehensively researched and carefully considered by Wesfarmers and Bunnings. The Bunnings team has done a lot of work to make sure it understands the market and the opportunity, including having visited hundreds of stores, spending significant time researching the market and closely studying international retail expansions into the UK and other markets. Detailed due diligence has been completed and implementation and improvement planning is well advanced.”
Due to early transformation activity, the acquisition is expected initially to have an immaterial effect on Wesfarmers’ earnings per share and return on equity. From the third year post acquisition, the acquisition is projected to be progressively accretive reflecting long-term growth prospects.
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