WES Wesfarmers Limited

By Ian Walker

LONDON--Home Retail Group PLC (HOME.LN) said Monday it is selling its DIY chain Homebase to Australian diversified retailer Wesfarmers Ltd. (WES.AU) for 340 million pounds ($489.74 million), and plans to return GBP200 million to shareholders.

Home Retail announced last week that it and Wesfarmers were in talks, just days after the U.K. firm, which also owns the Argos catalogue chain, rejected a takeover offer from grocer J Sainsbury PLC (SBRY.LN).

"This transaction crystallizes value for our shareholders from our ownership of Homebase and specifically the work that we have been doing through the productivity plan," Chairman John Coombe said.

"Following completion of this transaction, the board will remain focused on the continuing transformation of our Argos business and the options for delivering shareholder value, supported by a strong overall financial position," he said.

Wesfarmers operates retail brands in Australia including clothing and homewares retailer Target and supermarket chain Coles.

Last Thursday Home Retail said it expects benchmark profit before tax for the year ending February to be around the bottom of the current range of market expectations, citing the recent trading period which included volatile trading at its Argos unit and lower sales at Homebase.

Like-for-like sales at Argos in the 18 weeks ended Jan. 2 fell 2.2% to GBP1.84 billion, while Homebase's like-for-like sales rose 5% to GBP434 million, with growth broadly across all product categories, but particularly in big-ticket kitchen and bathroom products, Home Retail said last week.

Analysts expectations for group benchmark profit before tax, which strips out exceptional and other one-off items, for the financial year ending February is GBP92 million to GBP118 million. This compares with GBP132.1 million for the year ended Feb. 28, 2015.

Write to Ian Walker at ian.walker@wsj.com; @IanWalk40289749

(END) Dow Jones Newswires

January 18, 2016 02:35 ET (07:35 GMT)

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