Speculation is keen on the outcome of buyout talks for UK supermarket group Sainsbury’s DIY subsidiary Homebase, as industry analysts assess the reasons why completion of a deal has been so long in coming. Homebase has been up for grabs since the beginning of this summer, yet despite an initial flurry of European interest, the current talks with the financial buyer Schroder Ventures are the result of a tortuously long wait.
Sainsbury wanted £1bn for the chain, the 3rd largest in the UK, but it seems as if the bidders simply did not think it was worth it. Growth has continued at a faster rate than sector leader B&Q, but any buyer can expect to incur costs of. At least £50m is necessary to update Homebase’s archaic IT systems, and analysts have warned that a lack of buyer power that will inhibit future expansion: “Unless there are significant changes to the asset base, Homebase will remain at a disadvantage.”
In addition, the chain has already signed leases or acquired property for 30 new stores of around 100,000 sq ft. This alone will cost any buyer around £180m in development costs.
Some estimate that investment of £300m is necessary above and beyond the purchase price to bring Homebase up to scratch.