Farewell Homebase, Hello To A New Frontier

The Australian takeover of Homebase promises to be fascinating to watch.

Wesfarmers, the Aussie company that has paid £340m for the UK’s second largest do-it-yourself chain, is planning to rebrand it as Bunnings - its market-leading domestic brand.

Bunnings is regarded as an Australian institution. Its ‘sausage sizzle’ events for customers at weekends are exceptionally popular and likely to be introduced here.

It (Other OTC: ITGL - news) is renowned for the way it conjures up a frontier spirit to appeal to the macho Australian male caricature.

Yet there have to be question marks over whether Britons are ready for such a retailer. As a commentator in The Australian newspaper notes: “Bunnings might flop in a nation where people are more likely to rent flats, backyards are too small to have a shed and it is too cold and rainy to fix up your house on the weekend anyway.”

The Bunnings rebranding will also be a major reversal of strategy for Homebase.

Around 16 years ago, recognising that B&Q, the market leader, was too big and powerful a competitor to take on head-to-head, it instead softened its approach to stock more home furnishings and ‘enhancements’ and to appeal more to female customers.

This instead took the fight to weaker competitors such as Focus and proved an astute move: Focus later collapsed after an ill-fated acquisition spree that saw it take over rivals like Do It All, Wickes and Great Mills, taking it more into confrontation with B&Q.

Remodelling Homebase along the lines of Bunnings will bring it back into more direct competition not only with B&Q but also with Wickes which, since being bought by Travis Perkins (LSE: TPK.L - news) from Focus a decade ago, has flourished.

Another concern is that the track record of Australian companies that have taken over UK businesses is somewhat patchy. National Australia Bank has long regretted its acquisition of Yorkshire Bank and Clydesdale Bank, both of which have been quietly up for sale for years, with the latter about to be floated on the stock market.

Even (Taiwan OTC: 6436.TWO - news) more disastrous was the string of UK acquisitions carried out between 1989 and 1999 by AMP, the Aussie wealth manager, including Pearl, Henderson and National Provident Institution.

In 2003, following various misfortunes in the British arm caused partly by three successive annual falls in the FTSE-100, AMP reported a loss of A$5.8bn – the largest in Australian corporate history.

Further back, there was the £1.4bn takeover in 1986 by Elders IXL of Courage, then one of the UK’s largest brewers. It followed this up with an attempt to buy Scottish & Newcastle that was blocked by the old Monopolies & Mergers Commission. Ironically, in 1996, S&N itself bought Courage from Elders IXL - by now renamed Foster’s - for just £425m.

So wish Wesfarmers well as it takes over Homebase. That the acquisition is taking place rather points to the triumph of hope over experience.