Wesfarmers has sold the Homebase business in the United Kingdom and Ireland to a company associated with Hilco Capital for £1, two years following its acquisition.

Australian-based Wesfarmers acquired the DIY store business for £340million but within its first year’s trading results the Homebase business, rebranded as Bunnings, reported a loss of £54million.

Under the terms of the agreement, the buyer will acquire all Homebase assets, including the Homebase brand, its store network, freehold property, property leases and inventory for a nominal amount.

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The 24 Bunnings pilot stores will convert to the Homebase brand,following completion.

Wesfarmers Managing Director Rob Scott commented on the sale: “A divestment under the agreed terms is in the best interests of Wesfarmers’ shareholders and will support the ongoing reset and repositioning of the Homebase business.

”While the review confirmed the business is capable of returning to profitability over time, further capital investment is necessary to support the turnaround.

“The materiality of the opportunity and risks associated with turnaround are not considered to justify the additional capital and management attention required from Bunnings and Wesfarmers.

“Homebase was acquired by Wesfarmers in 2016. The investment has been disappointing, with the problems arising from poor execution post-acquisition being compounded by a deterioration in the macro environment and retail sector in the UK.

“While it is important that we learn from this experience, this should not discourage our team from being bold and diligent in pursuing opportunities to create shareholder value.

“We acknowledge the past six months have been particularly challenging for the BUKI management and our team members in the UK and Ireland and we thank them sincerely for their hard work and commitment.

“The operating performance of the business has improved in recent months under the new management team led by Damian McGloughlin and he will continue to lead Homebase in delivering management’s turnaround plan.

“We wish Damian and the team well during the transition and as they take the business into its next chapter under a new owner with a track record of retail turnaround in the UK.”