Woolworths Limited is set to exit its home improvement businesses, Masters Home Improvement and Home Timber & Hardware, while competitor Bunnings is on the expansion trail. Source: Timberbiz
Woolworths Limited is to exercise its call option over the 33.3% interest in Hydrox Holdings Pty Ltd (Hydrox) held by WDR Delaware Corporation, a subsidiary of Lowe’s Companies Inc (Lowe’s), following notice of Lowe’s election to be able to exercise its put option under the joint venture agreement.
Hydrox operates Masters Home Improvement (Masters) and Home Timber & Hardware (HTH) together these are ‘Home Improvement’.
“Our recent review of operating performance indicates it will take many years for Masters to become profitable. We have determined we cannot continue to sustain ongoing losses from this business,” said Woolworths chairman Gordon Cairns.
“Following the exercise of our call option, we intend to pursue an orderly prospective sale or wind-up of the business. This enables full ownership of the business by Woolworths in a shorter timeframe and gives us access to the widest range of exit options.
“This important decision allows Woolworths to focus its energy and resources on strengthening and executing its plans in its core businesses.
“While we will move as quickly as possible, the put and call options process will take at least two months to complete and following this a potential sale process or other exit process will take additional time.
“The business will continue to trade through this period. Our top priority is to do the right thing by shareholders, staff, suppliers and customers and we will act quickly and openly to minimise the impact of this decision.”
The Bunnings brand will enter the UK’s $US79 billion home improvement market after acceptance of owner Wesfarmers’ $A705 million bid for the chain.
Wesfarmers, which also owns the Coles supermarket chain, says the acquisition of 265 Homebase stores will make it the second largest home improvement and garden retailer in the UK and Ireland.
Homebase reported revenue of $A3.05 billion for the year ended August 29.
The cost of overhauling the stores means the acquisition from the UK’s Home Retail Group is expected to have an immaterial effect on Wesfarmers’ earnings per share and return on equity for three years, after which it is projected to contribute positively.
“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,” Wesfarmers managing director Richard Goyder said in a statement.
“The 38 billion (pound) UK home improvement and garden market is a large and growing market with strong fundamentals.”
