Wesfarmers to enter UK market

The Bunnings brand may be appear in the UK.

Bunnings owner Wesfarmers hopes to make its first overseas foray with a A$705 million ($754 million) play for one of Britain's biggest home improvement chains.

The Perth-based conglomerate, which also owns Coles, has made a 340 million ($755 million) offer for the big box Homebase chain, which it plans to rebrand as Bunnings.

Homebase is the second largest home improvement and garden retailer in the UK and Ireland, with 265 stores and annual revenue of 1.5 billion.

"The UK home improvement and garden market is an attractive and growing market," Wesfarmers said yesterday.

Wesfarmers has been in secret talks to buy Homebase from its parent company, Home Retail, since September.

The Aussie conglomerate was forced to confirm it had examined the Homebase books and signed an exclusivity agreement after details of the deal leaked in London overnight.

Bunnings is the dominant home improvement retailer in Australia and Wesfarmers hopes to replicate its success in Britain.

Morningstar analyst Daniel Mueller said Homebase's operating margins had fallen in the past decade, while Bunnings had a healthy 11 per cent.

"There is potential for a large prize for Wesfarmers management if they can operate it as well as they do with Bunnings in Australia," he said.

However, he said Britain's hardware sector was more competitive than Australia's and Wesfarmers would have to adapt to different consumer preferences and supply dynamics in the UK.

The UK has two other major DIY retailers: The biggest being Kingfisher's B&Q and the other major player being Travis Perkins' Wickes chain.

Shares in Wesfarmers were down 66c, or 1.6 per cent, at $39.29 in afternoon trading yesterday.