LONDON (Reuters) - Shares in Kingfisher (KGF.L), the owner of Britain’s do-it-yourself chain B&Q, rose on Monday after Australia’s Wesfarmers (WES.AX) took a large writedown on its acquisition of rival Homebase and said it could leave the market.
Wesfarmers wrote off A$1.3 billion related to Homebase on Monday, more than the A$705 million it paid for the DIY chain two years ago, saying it had made a series of “self induced” blunders in managing the firm.
Wesfarmers was seeking to replicate the success of its Bunnings Australian hardware stores in its first foray into Britain, but said it had misjudged the market.
It would close up to a sixth of its 234 stores in Britain, it said, and the option of selling the business was under consideration, though not the preferred outcome.
“Pulling the plug on B&Q’s largest competitor would have major benefits for Kingfisher,” broker Jefferies said. “We believe that the chances of an exit are greater than 50 percent, if we consider the key factors behind this weakness.”
It said the benefits of an exit to Kingfisher were self-evident, given Wesfarmers UK sales of 1.23 billion pounds against around 3.5 billion pounds at B&Q.
UBS said the re-positioning of Homebase had already benefited Wickes, particularly in the showroom category.
“There may be further benefits as Homebase store closures result in share shift,” it said. “However, trading in DIY may have weakened towards the end of 2017, which is a negative readacross for Wickes.”
Reporting by Paul Sandle; Editing by Catherine Evans