The company which owns Coles and Bunnings, announced this morning it began discussions with Home Retail Group in September 2015.
Wesfarmers said it signed an exclusivity agreement with Home Retail in early December and confirmatory due diligence had now been completed, with transaction documentation in the process of being finalised.
Homebase is the second largest home improvement and garden retailer in the UK and Ireland, with 265 stores and a reported revenue of £1.46 billion.
The acquisition would be the first step in a program to reinvigorate core Homebase assets and build a new Bunnings-branded business over the next three to five years, Wesfarmers said.
Wesfarmers outlined the strategic rationale behind the bid, stating the UK home improvement market is attractive and growing market.
Homebase delivers an established and scalable platform with stores which, Wesfarmers says, is the right size for the UK market and support warehouse merchandising and a low cost operating model.
The transaction is subject to approval by Home Retail Group shareholders.
Home Retail chief executive, John Walden, said a sale represented good value for shareholders and would allow the business to focus on Argos.
“The sale would allow the group to focus on Argos and its transformation plan, with an improved balance sheet and financial position, which I believe represents an even greater opportunity for building long-term shareholder value,” he said.
UK supermarket group, Sainsbury’s, also made a bid for all of Home Retail in November, well after talks began with Wesfarmers, which the group rejected, saying it undervalued Home Retail Group and its long-term prospects.