Aussie consumer giant makes all-cash offer for British home improvement chain

Australian consumer giant Wesfarmers has set its sights on acquiring home improvement and garden retailer Homebase from British-based Home Retail Group for 340 million pounds sterling (489.90 million U.S. dollars) in cash.

If successful, it will be the Australian hardware and supermarket giant's first foray into offshore markets. Wesfarmers owns Australia's second largest supermarket band Coles which has recently been outperforming rival Woolworths.

"The UK home improvement and garden market is an attractive and growing market," Wesfarmers said in a statement to the Australian Securities Exchange (ASX) before the opening of trade on Wednesday, confirming a takeover offer had been made.

Wesfarmers and Home Retail Group have been in talks since September, with due diligence having been completed leading to an exclusivity agreement being signed in December 2015.

"The transaction is advanced and in the process of being finalised" though "there is no certainty the offer will lead to an agreed transaction," Wesfarmers said.

Wesfarmers said it would "reinvigorate core Homebase assets" to build a Bunnings-branded home and hardware business over three to five years.

Bunnings is the leading home improvement and outdoor living retailer in Australia and New Zealand.

Home Retail chief executive John Walden said the sale represented good value for shareholders as it would come about a year into the three-year improvement plan of the home improvement chain, currently ranked third in the British market.

"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 and even greater opportunity for building long-term shareholder value," Walden said.

Home Retail plans to return 200 million pounds sterling (288.18 million U.S. dollars) to shareholders from the proceeds.

It's been reported UK supermarkets operator Sainsbury in November made an approach to buy Home Retail in its entirety, with its interest mainly focused on Argos.

This led to speculation Sainsbury would immediately offload the struggling Homebase.

An acquisition by Wesfarmers would alleviate that burden.

Sainsbury has until February 2 to make a firm offer.

At 11:32 local time (AEDT), Wesfarmers shares were down 62 Australian cents (43.01 U.S. cents), or 1.55 percent to 39.28 Australian dollars (27.25 U.S. dollars) in a broad-based sell off on negative sentiment from Wall Street. Endit