Jobs at risk as Homebase heads for new owner

By Mark Kleinman, City editor
The future of Homebase, Britain's second-biggest DIY chain, will be decided within days as its Australian owner nears the end of its cataclysmic foray into the UK retail sector, casting fresh doubt over thousands of jobs.
Sky News has learnt that advisers to Wesfarmers, the Sydney-listed company, received final bids on Tuesday from three turnaround investment firms: Alteri Investors, Endless and Hilco.
Sources said that Alteri, which previously owned Austin Reed, and Hilco, which bought HMV out of administration in 2013, were the leading candidates to buy Homebase.A decision is expected to be made by Wesfarmers and its advisers about a preferred bidder before the weekend.The fight between Alteri and Hilco points to a bleak fate for thousands more retail industry employees during a torrid period for Britain's high streets.Sources said that both Alteri and Hilco would seek to restructure Homebase - which is part of Wesfarmers' Bunnings division - by closing a significant number of its 220 stores, potentially putting thousands of people out of work.The UK DIY chain employs more than 11,000 people, and is expected to transfer to a new owner with a 'dowry' worth €75m or more.Its takeover by Wesfarmers has been a disaster for the Australian company, with Homebase said to be losing as much as €20m a month.Sales in the three months to the end of March fell 13.5% to €211m, according to figures published last month that Wesfarmers blamed partly on the 'Beast from the East' weather front which brought inclement conditions to the UK for an extended period earlier this year.Even under a new owner, the long-term future of Homebase will be far from assured, with Alteri or Hilco likely to examine a long-term winding down of the business.Alvarez & Marsal (A&M), a restructuring advisor, has been working with Wesfarmers on alternatives to a sale of Homebase, including an insolvency mechanism called a Company Voluntary Arrangement (CVA).Sources said that A&M would also be in line to act as administrator to Homebase if a solvent sale falls through in the coming days.
CVAs are being used by chains including Carpetright, Mothercare and New Look in an effort to shed unprofitable stores.Marks & Spencer is not turning to a CVA but announced this week that it would close 100 stores by 2022.Wesfarmers began approaching potential buyers of the DIY chain earlier this year, just two years after completing a €340m takeover.The Australian group has promised to update investors on the future of Homebase in early June.Homebase 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 ousted 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.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.
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Investment bankers at Lazard are handling the sale process.Wesfarmers could not be reached for comment, while Alteri, Endless and Hilco all declined to comment.
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