Home Retail nears Homebase sale for GBP340m cash

Home Retail has confirmed it is in advanced discussions to sell its Homebase arm to Australia's Wesfarmers Limited for £340m cash, possibly paving the way for suitor Sainsbury's to swoop again for the company's Argos business.

Home Retail, which rejected a takeover offer from Sainsbury's in November but remains a target for the grocer, said it had begun discussion with Perth-based Wesfarmers in September and received a firm offer letter in November.

With due diligence complete, the two boards are currently finalising transaction documentation, the FTSE 250 group said.

Earlier in the month, Home Retail said it had rejected Sainsbury's first offer as it undervalued the company, with some major shareholders calling for an offer of at least 200p for the entire group.

Once it completes the Homebase sale, chief executive John Walden said roughly £200m would be returned to shareholders, with £75m for restructuring, separation and deal costs, £50m for its pension scheme and £15m retained.

"This deal would represent good value for shareholders and a growth opportunity for the Homebase business and its colleagues," he said.

"The sale would allow the group to focus on Argos and its transformation plan, with an improved balance sheet and financial position, which I believe represents an even greater opportunity for building long-term shareholder value."