Wesfarmers at risk over Homebase: analyst

PERTH, Australia ― Wesfarmers’ $705 million acquisition of British hardware retailer Homebase has the makings of another Masters fiasco, a Merrill Lynch analyst has warned. David Errington says Wesfarmers’ plan to invest in rolling out the Bunnings brand in the UK poses the same risks as Woolworths’ doomed joint venture with Lowe’s, which was shut down earlier this year. “We were critical towards Woolworths entering the Australian home improvement sector via Masters and we believe Wesfarmers entering the UK market via Homebase will be as equally a compromising decision for Wesfarmers,” Errington said this week. “Paying $705 million for a business generating $40 million of earnings before interest and tax, and where that business is smaller scale in a tough industry, raises questions. And when a further $1 billion is being committed over the next five years to improve the business, we are highly skeptical.”