Wesfarmers Management To ‘Pay’ For Bunnings UK Flop
Wesfarmers CEO, Rob Scott, affirms management will ‘pay’ for their failed Bunnings UK foray, following the sale of its international arm to Hilco Capital for over a $300 million loss. The conglomerate’s decision to purchase Homebase UK has reportedly cost Wesfarmers shareholders over $1.5 billion in losses.
As per an ASX-announcement, Wesfarmers states it will record a £200 million – £230 million loss ($353 million – $406 million) from the business’ disposal in full-year results.
Hilco Capital will purchase the UK hardware business for a pittance, versus the $705 million Wesfarmers paid for Homebase stores in 2016. Costs are coupled with this year’s $1 billion write-down.
As previously reported, commentators claim management’s “fundamental failure” was to let “arrogance overcome common sense”. Rather than utilising a knowledgeable UK-based team – with expertise in the local market – Wesfarmers management sought to expand with the attitude “Australians know best“.
Scott claims Wesfarmers management will likely face “significant remuneration implications” over its failed Homebase UK acquisition.
Speaking to analysts this morning, Scott acknowledged the investment’s “negative financial implications”, while adding management would also feel pain as shareholders.
“… from a management point of view we are all shareholders, and will feel the pain of that, and there will be remuneration implications from the impairments and from the losses, and we will ultimately disclose that to the market in due course,” he adds.
Despite being pushed by analysts, Mr Scott failed to explicitly detail what financial penalties would be imposed on management.
Whilst asserting it’s “ultimately not my call”, Scott revealed a remuneration committee and board processes would likely result in significant remuneration implications.
Interestingly, Wesfarmers’ CEO, CFO and boss of Bunnings at the time of the Homebase deal, are no longer with the company.
Further insight and analysis on Wesfarmers’ Bunning UK sale is available in a previous report here.