Bidders for Homebase are being enticed with a huge dowry as the DIY chain’s Australian owner seeks a fast-track exit from its disastrous foray into the UK retail sector.
Sky News has learnt that Wesfarmers has asked prospective buyers of the business to submit initial offers on Monday.
Sources close to the seller say it is assembling a large financial package to hand to any new owner to help contend with its huge losses.
The value of the dowry has not been finalised, but one insider said it could easily exceed £100m.
Homebase, which trades from just under 250 stores across the UK, is expected to lose approximately £190m in this financial year on revenues of roughly £1bn, according to the source.
Sky News can also reveal that Alvarez & Marsal, the restructuring specialist, has been drafted in to advise Wesfarmers on alternatives to a sale, including a mechanism that would see it closing scores of Homebase outlets.
A so-called Company Voluntary Arrangement is also being explored by chains including House of Fraser and Carpetright as pressures mount on retailers to find ways of slashing their financial liabilities.
Wesfarmers began approaching potential buyers of the DIY chain several weeks ago, just two years after completing a £340m takeover.
Investment bankers at Lazard are handling the sale discussions, with turnaround investors such as Endless and Hilco reportedly interested in a takeover.
Homebase employed nearly 12,000 people in Britain across an estate of almost 250 stores at the end of last year.
The move to unwind Wesfarmers takeover of the UK’s second-biggest DIY chain comes less than three months before the Sydney-listed company has said it will update investors on the results of its strategic review.
Homebase, which is now part of Wesfarmers’ Bunnings UK and Ireland division, was intended to be a launchpad from which the Australian retailer would take on B&Q in a battle for supremacy in the DIY market.
However, Wesfarmers’ strategy has backfired spectacularly in the last 18 months, forcing it to write off more than £500m after it ditched some of Homebase’s most popular business lines.
It ditched the chain’s British management team, replacing them with an Australian leadership line-up which presumed the UK market would welcome the radically different Bunnings Warehouse retail model.
Its sales performance since the deal has produced the opposite result, with the British and Irish division reporting a 15.7% slump in revenue and a £97m loss before tax.
The recent adverse weather across the country has not helped either, with garden centre specialists reporting sharp declines in sales during the first quarter of 2018.
While Homebase’s travails are largely self-inflicted, they have compounded the sense of gloom engulfing Britain’s retail sector as online competition and rising high street costs squeeze many established chains.
Lazard’s involvement in the review of options for Homebase is notable because of its role in Wesfarmers’ purchase of the chain in 2016.
Archie Norman, the Marks & Spencer chairman, chairs Lazard’s London operation, and has held separate roles with various Wesfarmers operations for years.
Mr Norman is said to have advised Wesfarmers’ board not to proceed with the Homebase takeover.
A Bunnings UK and Ireland spokeswoman declined to comment.