Home Retail Group (HRG) confirmed today that it has signed an agreement to sell its Homebase business to leading Australian home improvement and outdoor living chain Bunnings.
The deal with Bunnings, which has over 300 stores across Australia and New Zealand and is a subsidiary of Wesfarmers, is worth £340m.

HRG said the transaction would allow it to "focus on the ongoing transformation plan at [sister business] Argos.

"We believe that this is the best deal for shareholders and for the business. Wesfarmers is an experienced and successful retailer with exciting plans to invest in and grow their presence in the UK through Homebase."

Wesfarmers will acquire the entire Homebase business, including all its stores and distribution centres. However, HRG-owned brands such as Habitat, Schreiber and Hygena will be excluded from the sale, but some of them will be licensed for use by Homebase for a year.

Outlining its reasons for the acquisition, Wesfarmers said that the UK home improvement and garden market was attractive and growing, and that Homebase delivered an established and scalable platform with right-size stores and a low-cost operating model.

It said it would "invest in the Homebase team and reinvigorate core Homebase assets to build an exciting new Bunnings-branded business over three to five years".

Over the last year or so Homebase has been the subject of a programme to close about a quarter of its stores, which has now largely been completed. HRG says it is now "on track to become a smaller, stronger business which is better positioned to support future investment and realise its potential for greater growth".

Homebase was founded in 1979 and was acquired by GUS in 2002. The Homebase business was subsequently demerged from GUS as part of HRG in 2006. The business carries out approximately 60 million customer transactions a year, sells around 38,000 products for the home and garden and currently has 265 stores plus an online business.

In the 26 weeks to August 29 2015, Homebase generated revenues of £816.4m and benchmark operating profit of £34.3m.

HRG revealed that it had begun discussions with Wesfarmers in September, and that it had received a firm offer in November. It said it believed the Argos transformation plan was its greatest potential source of shareholder value.